The stock market has been volatile entering 2025, with many high-tech stocks well below their highs as some investors question their lofty valuations and an uncertain economic environment. However, even in an uncertain market, there are still many things investors can rely on, such as beverage and snack company Pepsi (PEP) and its steady dividend growth. I’m bullish on Pepsi stock because of its attractive dividend yield, its long and proud history of consistently increasing its dividends over many decades, its modest valuation, and the enduring demand for its products.
There is no doubt that Pepsi is a blue-chip stock, as it is an iconic American company with a name and logo that are instantly recognizable to billions of people around the world. However, that doesn’t mean the stock is trading at a premium blue-chip valuation.
In fact, after falling 12.8% over the past year, Pepsi stock hits just 17.8 times full-year 2024 earnings estimates and 16.9 times December 2025 earnings consensus estimates even cheaper. These figures make Pepsi significantly cheaper than the broader market, as noted by the S&P 500 (SPX) currently trades at 24.8 times earnings. Interestingly, Pepsi is also cheaper than archrival Coca-Cola (KO), which trades at 20.9 times 2025 earnings estimates.
This cheap valuation should give Pepsi a high 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 economic valuation, Pepsi is one of the stocks with the highest dividends. It all starts with the dividend yield: Pepsi currently yields an attractive 3.7%, which is nearly triple the S&P 500’s 1.3% yield.
Beyond the above-average yield, Pepsi is an attractive dividend stock based on its decades-long commitment to paying and growing its dividend. Pepsi has paid dividends to its shareholders for 52 consecutive years and has increased the size of its payout in each of those 52 years. This consistency makes Pepsi a “dividend king,” placing it in one of the few stock companies to have increased its dividend payments for at least 50 years 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, which increases its dividend payout like clockwork every year.
There is some concern among investors that consumer demand for carbonated soft drinks will fall in developed markets such as the United States, but Pepsi is quite well positioned to weather this risk. Carbonated soft drinks have many growth possibilities in international and emerging markets. Additionally, Pepsi’s portfolio of brands features many beverage options for consumers in developed markets seeking healthier beverages, such as Bubly sparkling water, Pure Leaf iced tea and Tazo 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 salty snack market, worth more than $250 billion a year, with leading brands like Doritos, Cheeto’s , Lay’s, Fritos and Volantes all in your arsenal.
Late last year, the company also announced a deal to acquire the 50% of Sabra (best known for its hummus and other dips) that it didn’t already own, as well as a $1.2 billion deal for the chip maker of tortilla. Seven, which shows that the company has its sights set on long-term growth in this area.
Another good thing about Pepsi is that it is a consumer staples company that makes products that enjoy long-lasting demand from consumers. Even in a challenging macroeconomic environment, most customers who enjoy Pepsi or Diet Pepsi will continue to purchase them on their weekly trips to the supermarket. In an inflationary environment, consumers may be forced to delay or forgo larger ticket purchases, but a six-pack or box of Pepsi or Diet Pepsi still represents only 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 staple products like Quaker Oats oatmeal.
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PEP stock based on four Buys, three Holds, and zero Sells assigned over the last three months, as indicated by the chart below. After a 9% drop in its share price over the past year, PEP’s average price target of $167.86 per share implies 13.6% upside potential.
See more PEP analyst ratings
I’m bullish on Pepsi because of its attractive above-average dividend yield of 3.7% and its long, proud history of increasing its dividend payout for more than five decades. In a market that fluctuates between highs and lows and where trends can be fleeting, this type of long-term reliability is something worth celebrating.
I’m also constructive on Pepsi stock based on its below-average valuation – which should give investors decent downside protection and plenty of upside exposure – and its strong business selling consumer staples with lasting demand. This gives the stock a strong defensive backbone.
