Famed investor Warren Buffett has a shockingly simple goal. Buy good companies at reasonable prices and hold them so he, and the shareholders of Berkshire Hathaway (BRK.A 0.47%)(BRK.B 0.55%), can benefit from their long-term growth. It doesn't matter if the market, say the Nasdaq Composite (^IXIC 0.10%), has fallen into a correction or even a bear market. But holding through volatile markets takes discipline. This consumer staples giant, and Dividend King, can help you do just that.
What does it take to become a Dividend King?
A company earns the label of Dividend King by increasing its dividend for at least 50 consecutive years. The last five decades have included the dot.com bubble, the Great Recession, and a global pandemic. And those are just since the turn of the century. A good business plan executed well in both good markets and bad is a necessity if a company wants to achieve Dividend King status.
Image source: Getty Images.
Perhaps not surprisingly, few companies do earn Dividend King status. But consumer staples giant PepsiCo (PEP 0.57%) is one of these elite names, with 52 annual increases under its belt. It helps that the company makes food items, since customers tend to keep buying food no matter what is happening with the stock market or the economy.
However, there are a lot of consumer staples companies that aren't Dividend Kings. So there's more to the story than just the sector in which PepsiCo operates.
NASDAQ: PEP
Key Data Points
What does PepsiCo offer investors?
PepsiCo's business is fairly well diversified. It operates in the beverage, snack, and packaged foods spaces. That said, it is the No. 2 non-alcoholic beverage company in the world and the No. 1 salty snack company. And while it's just a competent competitor in packaged foods, it does own the iconic Quaker Oats brand. Any one of these successes alone would make PepsiCo an important company; all three make it a dominant industry participant and a vital partner for retailers the world over.
Backing up its industry position is research and development, marketing, and distribution acumen that rival any of its peers. The company's size, meanwhile, gives it the opportunity to be an industry consolidator. On this score, it recently acquired Siete Brands, a Mexican American food company. The plan, as usual, is to grow the brand by plugging it into PepsiCo's distribution and marketing system.
Still, every year isn't a great year, even for a Dividend King like PepsiCo. And 2024 represented a slowdown after particularly strong performance coming out of the inflation surge following the coronavirus pandemic. The "bad" year was marked by 2% organic sales growth and 9% adjusted earnings growth. Those figures would probably be considered good for most companies.
The stock is well off its recent highs and offering a historically elevated 3.5% dividend yield. (Check out the stock's move in the past month in the chart below.)
But the Nasdaq's fall into correction territory could be the catalyst that changes things. Fearful investors are dumping higher risk stocks and looking for good value from historically reliable businesses. That's exactly what PepsiCo is offering right now. If you don't act quickly Mr. Market could take away this opportunity to buy a great company at an attractive price.
Don't think short term with PepsiCo
As the Nasdaq has fallen, high-yield PepsiCo has risen recently. There are two types of investors who might be buying it right now. Those looking for a safe haven during a market storm, which are people thinking short term. And then long-term dividend investors that want to own a great company so they can benefit from its ongoing growth, which is the way that Buffett likes to invest.
Don't miss out on the opportunity to be the second kind of investor because the first kind beat you to this attractively priced stock.
