Nearly a quarter through 2025, the S&P 500 (^GSPC +1.20%) is down year to date -- a noticeable step change after the index posted back-to-back 20% annual gains in 2023 and 2024.
Some investors may be looking for companies with compelling valuations that could be good buys even during a period of market turbulence, while others may be gravitating toward passive income opportunities.
Here's why PepsiCo (PEP 0.45%) is a dream value and income stock to buy in April.
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Navigating a slowdown
Pepsi stock is hovering around a four-year low as sales volumes dip across its core segments: PepsiCo Beverage, Frito-Lay, and Quaker Foods.
NASDAQ: PEP
Key Data Points
When Pepsi is at its best, it is a diversified behemoth spanning beverages and snacks. But weak consumer demand and unfavorable foreign exchange conditions impacted Pepsi's profitability in recent years. Analyst consensus estimates point to clearer skies ahead -- calling for $8.29 in 2025 earnings per share (EPS) and $8.82 in 2026 EPS. In its fourth-quarter 2024 earnings release from February, Pepsi provided guidance for 2025, expecting a low-single-digit increase in organic revenue and a mid-single-digit increase in constant-currency EPS.
On its latest earnings call in February, Pepsi provided more details on the reasoning behind the organic growth guidance. North America has been particularly weak, but international is expected to drive 2025 results. International is more vulnerable to geopolitical tensions and foreign exchange headwinds because sales made in other currencies must be converted back into U.S. dollars when Pepsi reports earnings.
The good news for the company is that the U.S. dollar has been weakening. The euro-to-dollar conversion ended February around $1.04, but has since increased back up to around $1.08. A weaker dollar should help Pepsi in 2025, especially if it depends on international to drive its organic growth.
Pepsi is in growth mode
Despite sluggish sales growth, Pepsi continues to deploy capital on mergers and acquisitions (M&A). In November, Pepsi announced it was becoming the sole owner of Sabra and Obela snack and dip products. In January, Pepsi completed its acquisition of Mexican-American food brand Siete Foods for $1.2 billion. And on March 17, Pepsi announced it would acquire Poppi, a prebiotic soda brand, for $1.95 billion.
On their own, each acquisition isn't a showstopper, given how massive Pepsi is. But they share a common thread in that Pepsi is diversifying toward more health-conscious and purposeful snack and food brands. Pepsi's biggest brands remain centered around sugar and poor nutrition content, from soda products like flagship Pepsi and Mountain Dew to high-sugar drinks like Gatorade and Tropicana juices, to Frito-Lay snacks like Lay's, Cheetos, Doritos, Tostitos, etc.
On its February earnings call, Pepsi discussed the opportunity in away-from-home beverages and foods. Healthier, ready-to-eat options could help Pepsi capture more of the lunch market rather than depend heavily on snacks.
Pepsi's recent M&A moves indicate it's adjusting to buyer behavior trends -- great news for long-term investors who want to ensure the company has a clear path toward earnings growth even if consumer preferences change.
Pepsi is one of the best Dividend Kings for generating passive income
Pepsi is diversifying its business and expanding into new markets, which should allow the company to be a coiled spring for growth once consumer pressures ease.
In the meantime, investors are getting the chance to buy Pepsi for a dirt cheap valuation. Pepsi has raised its dividend for 53 consecutive years -- making it a Dividend King. Dividend Kings are companies that have increased their payouts for at least 50 years. As of March 3, only 55 stocks qualified as Dividend Kings.
Many Dividend Kings are consumer goods companies. Here's a look at other consumer goods companies (excluding tobacco companies and retailers like Walmart and Target) and how their forward price-to-earnings (P/E) ratios stack up against Pepsi.
LANC PE Ratio (Forward) data by YCharts
And here's a look at the dividend yields of those same companies.
HRL Dividend Yield data by YCharts
All told, Pepsi's dirt cheap 17.6 forward P/E and 3.7% dividend yield make it arguably the best consumer goods Dividend King when it comes to combining value and income.
Pepsi stock is a screaming buy
Pepsi stock is simply too good a company to be this beaten down. Investments across the business, as well as active M&A activity, showcase Pepsi's focus on long-term growth even during a downturn.
Pepsi is a great buy for investors who like its portfolio of brands and agree with its investments in healthier and ready-to-eat options. With Pepsi, risk-averse investors can boost their passive income streams without paying a premium price for a top company.
