The stock market has been volatile to kick off 2025, with many top tech stocks well off their highs as some investors query their lofty valuations and an uncertain economic environment. Nonetheless, even in an uncertain market, there are still many things investors can depend on, like beverage and snack company Pepsi (PEP) and its regular dividend growth. I’m bullish on Pepsi stock based on its attractive dividend yield, its long and proud history of consistently growing its dividend for a lot of a long time, its modest valuation, and the durable demand for its products.
There’s little query Pepsi is a blue-chip stock because it is an iconic American company with a reputation and logo which are immediately recognizable to billions of individuals around the globe. Nonetheless, that doesn’t mean the stock trades at a premium, blue-chip valuation.
The truth is, after declining 12.8% over the past 12 months, shares of Pepsi fetch just 17.8 times 2024 full-year earnings estimates and a good cheaper 16.9 times December 2025 consensus earnings estimates. These numbers make Pepsi significantly cheaper than the broader market, because the S&P 500 (SPX) currently trades for twenty-four.8 times earnings. Interestingly, Pepsi can be cheaper than its archrival Coca-Cola (KO), which trades for 20.9 times 2025 earnings estimates.
This inexpensive valuation should give Pepsi a powerful degree of downside protection in a volatile market and leave loads of room for a multiple expansion in a bullish market environment, especially for the reason that stock has ceaselessly traded at higher P/E ratios through the years.
Along with this inexpensive valuation, Pepsi is a top dividend stock. It starts with the dividend yield — Pepsi currently yields an attractive 3.7%, which is sort of triple the S&P 500’s 1.3% yield.
Beyond the above-average yield, Pepsi is an appealing dividend stock based on its multi-decade commitment to paying and growing its dividend. Pepsi has paid dividends to its shareholders for 52 years in a row, and it has increased the scale of its payout in each of those 52 years. This consistency makes Pepsi a “Dividend King,” placing it within the rare company of stocks which have raised their dividend payouts for not less than 50 years in a row. Other notable Dividend Kings include Coca-Cola, Goal (TGT), Johnson & Johnson (JNJ), AbbVie (ABBV) and Walmart (WMT).
In a market where few things are certain, it’s nice to have the opportunity to ‘set it and forget it’ with a Dividend King like Pepsi that increases its dividend payout like clockwork every 12 months.
There may be some concern amongst investors that consumer demand for carbonated soft drinks will fall in developed markets like the US, but Pepsi is fairly well-positioned for this risk. Carbonated soft drinks have loads of runway for growth in international and emerging markets. Plus, Pepsi’s brand portfolio features loads of beverage options for developed-market consumers searching for healthier beverages, like Bubly sparkling water, Pure Leaf iced tea, and Tazo tea.
Lastly, it’s essential to do not forget that there may be far more to Pepsi than simply beverages — it’s also the primary player within the lucrative savory snacks market, value over $250 billion annually, with leading brands like Doritos, Cheeto’s, Lay’s, Fritos, and Ruffles all in its arsenal.
Late last 12 months, the corporate also announced a deal to amass the 50% of Sabra (best known for its hummus in addition to other dips and spreads) that it didn’t already own, in addition to a $1.2 billion deal for tortilla chip maker Siete, illustrating that the corporate has its sights set on long-term growth on this area.
One other nice thing about Pepsi is that it’s a consumer staples company making products that enjoy durable demand from consumers. Even in a difficult macroeconomic environment, most customers who enjoy Pepsi or Food plan Pepsi will proceed to choose it up on their weekly grocery trips. In an inflationary environment, consumers could also be forced to delay or forgo greater ticket purchases, but a six-pack or case of Pepsi or Food plan Pepsi still represents only a small percentage of their budget that they’re unlikely to chop.
The identical will be said in regards to the aforementioned savory and salty snacks that Pepsi sells or staples like Quaker Oats oatmeal.
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PEP stock based on 4 Buys, three Holds, and 0 Sells assigned prior to now three months, as indicated by the graphic below. After a 9% decline in its share price over the past 12 months, the average PEP price goal of $167.86 per share implies 13.6% upside potential.
I’m bullish on Pepsi based on its attractive, above-average 3.7% dividend yield and its long and proud history of growing its dividend payout for over five a long time. In a market that runs cold and warm and where trends will be fleeting, the sort of long-term reliability is something to have a good time.
I’m also constructive on Pepsi stock based on its below-average valuation–which should give investors decent downside protection and lots of exposure to the upside–and its strong business of selling consumer staples with durable demand. This offers the stock a powerful defensive backbone.