The stock market has been volatile heading into 2025, with many big tech stocks rising off their highs as some investors question their lofty valuations and the uncertain economic environment. However, even in an uncertain market, there are still many things that investors can count on, such as beverage and snack company Pepsi (PEP) and its steady earnings growth. I’m bullish on Pepsi stock based on its attractive dividend yield, its long and proud history of consistently increasing its dividend for many decades, its modest valuation, and the enduring demand for its products.
There is no doubt that Pepsi is a leader because it is an iconic American company with a name and logo that is instantly recognizable to billions of people around the world. However, this does not mean that the stock is trading at a premium valuation.
In fact, after falling 12.8% over the past year, Pepsi shares are just 17.8 times full-year 2024 earnings estimates and up to 16.9 times cheaper than December 2025 consensus earnings estimates. These numbers make Pepsi significantly cheaper than the broader market. , such as the Standard & Poor’s 500 Index (SPX) is currently trading at 24.8 times earnings. Interestingly, Pepsi is also cheaper than arch-rival Coca-Cola (KO), which trades at 20.9 times 2025 earnings estimates.
This inexpensive valuation should give Pepsi a strong degree of downside protection in a volatile market and leave plenty of room for multiple expansion in a bull market environment, especially since the stock has frequently traded at higher P/E ratios over the years.
In addition to this inexpensive valuation, Pepsi is a company Highest dividend stocks. It starts with the dividend yield – Pepsi currently Attractive returns of 3.7%That’s nearly three times the S&P 500’s 1.3% return.
Beyond the above-average return, Pepsi is attractive Dividend stocks Building on its multi-decade commitment to pay dividends and grow them. Pepsi has paid a dividend to its shareholders for 52 years in a row, and has increased its dividend in each of those 52 years. This consistency makes Pepsi a “dividend king,” placing it among a rare group of stocks that have raised its dividend for 50 years. At least one year in a row. Other 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 be able to “set it and forget it” with a Dividend King like Pepsi that increases its dividend like clockwork every year.
There is some concern among investors that consumer demand for soft drinks will decline in developed markets like the United States, but PepsiCo is fairly well positioned to counter these risks. Carbonated soft drinks have ample scope for growth in international and emerging markets. Additionally, Pepsi’s portfolio of brands features plenty of beverage options for consumers in developed markets looking for healthy beverages, such as Bubbly Sparkling Water, Pure Leaf Iced Tea, and Tazo Tea.
Finally, it’s important to remember that Pepsi isn’t just about drinks, it’s also the No. 1 player in the lucrative salty snack market, worth more than $250 billion annually, with leading brands like Doritos, Cheeto’s, Lay’s, Fritos, and Ruffles all… In its arsenal.
Late last year, the company also announced a deal to acquire the 50% of Sabra (famous for its hummus as well as other dips and spreads) that it didn’t already own, as well as a $1.2 billion deal for a tortilla chip maker. Siete, which shows that the company has its sights set on achieving long-term growth in this field.
Another nice thing about Pepsi is that it is a consumer goods company that makes products that enjoy constant demand from consumers. Even in a challenging macroeconomic environment, most customers who enjoy Pepsi or Diet Pepsi will continue to pick it up on their weekly grocery trips. In an inflationary environment, consumers may have to delay or forego purchasing larger tickets, but a can of Pepsi, a can of Pepsi, or Diet Pepsi still represents just a small percentage of their budget that they are unlikely to cut.
The same can be said for the aforementioned salty and salty snacks sold by Pepsi or pantry staples like Quaker Oats.
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PEP stock based on four buys, three holds and zero sells identified in the past three months, as shown in the chart below. After a A 9% decline in its share price During the past year, Average PEP price target $167.86 per share suggests an upside potential of 13.6%.
I’m bullish on Pepsi based on its attractive above-average dividend yield of 3.7% and its long and proud history of increasing the dividend for more than five decades. In a market that’s hot and cold and where trends can be fleeting, that kind of long-term reliability is something to celebrate.
I’m also building on Pepsi stock based on its below-average valuation — which should give investors good downside protection and plenty of upside exposure — and its strong business of selling consumer staples with perpetual demand. This gives the stock a strong defensive backbone.
