PepsiCo’s Dividend and Investment Potential

• PepsiCo recently announced an impressive dividend yield of 4.1%.

• The company has increased its dividend payments for over 50 consecutive years.

• Despite facing various challenges, PepsiCo is actively working to improve its situation.

There are plenty of reasons why I find PepsiCo (NASDAQ: PEP) to be a worthy long-term investment option. For starters, that robust dividend yield of 4.1% stands out, especially when compared to the S&P 500’s modest 1.2%. What’s even more appealing is that this dividend has consistently grown, averaging over 7% annually for the last decade.

And there’s more to it! Recently, the percentage of revenue paid out as dividends was around 67%, which provides ample room for growth. Impressively, PepsiCo has now raised its dividend for the 53rd year in a row!

You might think of PepsiCo as simply a beverage company, but that’s not the whole picture. The portfolio includes well-known brands like Gatorade, Mountain Dew, and Quaker, along with snacks like Doritos. Additionally, PepsiCo is looking to expand further with new acquisitions, like the prebiotic soda brand, Poppi.

Currently, PepsiCo’s stock presents an attractive opportunity with a forward-looking price-to-earnings (P/E) ratio of 16.5, especially considering the five-year average of 21.9. This lower valuation seems to be a result of a recent decline in stock performance, as the company adapts to shifting consumer preferences. Notably, the acquisition of POPPI could help reduce costs.

Chairman and CEO Ramon Laguarta shared insights on the company’s future, stating:

Moving forward, we will continue to build on our international successes and focus on boosting performance in North America. This includes innovations in our product portfolio and cost-saving measures, which should enhance growth and profitability. We are optimistic about achieving low single-digit organic revenue growth by fiscal year 2025.

If you’re optimistic about PepsiCo’s long-term potential, this might be a good time to invest. However, it’s wise to consider a few pointers before diving in.

The Motley Fool Stock Advisor team has selected ten stocks they believe could outperform PepsiCo, suggesting there are potentially better investment opportunities right now.

To illustrate, a list created on December 17, 2004, about Netflix showed that a $1,000 investment back then would now be worth approximately $661,694. Similarly, an early recommendation for NVIDIA from April 15, 2005, could have turned a $1,000 investment into about $1,082,963.