The stock market has been volatile to start 2025, with many top tech stocks hitting their highs as some investors question their lofty valuations and the uncertain economic environment , which investors can count on, like Pepsi Beverages and Snacks Company ( PEP ) and its steady dividend growth.I’m bullish on Pepsi stock based on its attractive on dividend yield, a long and proud history of growing its dividend for many decades, a modest valuation and steady demand for its products.
There’s no doubt that Pepsi is a blue-chip stock because it’s an iconic American company with a name and logo instantly recognizable to billions of people around the world, but that doesn’t mean the stock trades at a premium, blue-chip valuation :
In fact, after falling 12.8% over the past year, Pepsi shares trade at just 17.8 times full-year 2024 earnings estimates and an even cheaper 16.9 times consensus earnings estimates for December 2025. These numbers Making Pepsi significantly cheaper than the broader market, the S&P 500 (SPX:) currently trades at 24.8 times earnings. Interestingly, Pepsi is also cheaper than its arch-rival Coca-Cola ( KO ), which trades at 20.9 times 2025 earnings estimates. :
This cheap valuation should give Pepsi a strong degree of downside protection in a volatile market and leave plenty of room for multiple expansion in a bullish market environment, especially since the stock has often traded at higher P/E ratios over the years.
In addition to this cheap valuation, Pepsi is top dividend stock. It starts with the dividend yield, Pepsi currently gives a tempting 3.7% yieldwhich is nearly triple the S&P 500’s return of 1.3%.
Outside of above-average returns, Pepsi is attractive dividend stock Based on its long-term commitment to paying and growing its dividend, Pepsi has paid dividends to its shareholders for 52 consecutive years, and has increased its payout in those 52 years. This consistency makes Pepsi the “dividend king,” making it a rare company. , which have raised their dividend payments for at least 50 consecutive years notable dividend kings include Coca-Cola, Target ( TGT ), Johnson & Johnson ( JNJ ), AbbVie ( ABBV ), and Walmart ( WMT ).
In a market where few things are certain, it’s nice to “set it and forget it” with a dividend king like Pepsi, which increases its dividend payout like clockwork every year.
There is some concern among investors that consumer demand for carbonated soft drinks will decline in developed markets such as the United States, but Pepsi is well positioned for this risk ’s brand portfolio includes multiple beverage options for developed market consumers looking for healthier beverages such as Bubly Sparkling Water, Pure Leaf Iced Tea and Tazo the tea
Finally, it’s important to remember that Pepsi is much more than just drinks; it’s also the number one player in the lucrative snack market, worth more than $250 billion a year, with leading brands like Doritos, Cheeto’s, Lay’s, Fritos and Ruffles across its arsenal.
Late last year, the company also announced a deal to acquire a 50% stake in Sabra (best known for its hummus as well as other spreads), which it didn’t already own, as well as a $1.2 billion deal for tortilla chip maker Siete given that the company has its sights set on long-term growth in this sector.
Another nice thing about Pepsi is that it is a consumer staple company that produces products that enjoy steady consumer demand. Even in a challenging macroeconomic environment, most customers who enjoy Pepsi or Diet Pepsi will continue to buy. it on their weekly grocery trips.With inflation, consumers may be forced to delay or forgo larger-ticket purchases, but a six-pack or Diet Pepsi still represents only a small percentage of their budget, which they are unlikely to cut.
The same can be said for the aforementioned savory and salty snacks that Pepsi sells or staples like Quaker Oats oatmeal.
Turning to Wall Street, analysts have a consensus rating of Moderate Buy on PEP stock, based on four Buys, three Holds and zero Sells assigned in the past three months, as indicated in the chart below.After a 9% drop in share price during the past year average PEP price target $167.86 per share implies a 13.6% upside potential.
I’m rooting for Pepsi based on its attractive, above-average dividend yield of 3.7% and a long and proud history of paying dividends for more than five decades.In a market that runs hot and cold, and where trends can be fleeting, this the type’s long-term reliability is a cause for celebration.
I’m also bullish on Pepsi stock based on its below-average valuation, which should provide investors with decent protection and strong upside exposure, and its strong consumer staples business with steady demand, giving the stock a solid defensive backbone.
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