3 Reasons PepsiCo Stock Is a Must-Buy for Long-Term Investors

PepsiCo (PEP) is a global leader in the food and beverage industry, with a diverse portfolio of iconic brands such as Pepsi, Lay's, Gatorade, Tropicana, and Quaker. The company's commitment to sustainability, innovation, and adaptability to changing consumer preferences has positioned it as a strong contender in the market. Here are three compelling reasons why PepsiCo stock is an attractive choice for long-term investors:

1. Sturdy growth and consistent performance: PepsiCo has a proven track record of delivering steady growth and consistent financial performance. In 2024, the company reported organic sales growth of 2%, driven by solid growth in overseas markets like Europe and Latin America. While this growth was modest compared to the prior year's 9% spike, it is essential to consider the unusual pressures PepsiCo faced in 2024, such as a large safety recall in its Quaker Foods unit. Management expects another year of subdued growth in 2025, with organic sales likely to rise by at least 2% as profits expand around 4%. This consistent growth trajectory demonstrates PepsiCo's ability to navigate market challenges and maintain its competitive edge.
2. Passive income through dividends: PepsiCo is known for its generous and consistent dividend payouts, making it an attractive choice for income-oriented investors. The company's annual dividend is $5.42 per share, with a yield of 3.78%. The dividend is paid every three months, and the next ex-dividend date is Mar 7, 2025. PepsiCo's commitment to returning capital to shareholders through dividends is a testament to its strong financial performance and confidence in its future prospects. The company's dividend history, spanning over 50 consecutive years, further solidifies its reputation as a reliable income generator.
3. Undervalued stock price and growth potential: PepsiCo's stock price has been relatively stable in recent years, with a five-year low P/S ratio of 2.2. This valuation represents a significant discount compared to its competitors, such as Coca-Cola (KO) and McCormick (MKC), which trade at higher P/S ratios. Additionally, PepsiCo's stock price is close to a five-year low, indicating that the market may be undervaluing the company's growth potential. As PepsiCo continues to execute on its growth strategies and adapt to changing consumer preferences, its stock price is likely to appreciate, providing long-term investors with significant capital gains.

In conclusion, PepsiCo's strong growth trajectory, consistent dividend payouts, and undervalued stock price make it an attractive choice for long-term investors. The company's commitment to sustainability, innovation, and adaptability to changing consumer preferences positions it well for continued success in the global food and beverage market. As a result, investors can expect steady growth, passive income, and potential capital gains from investing in PepsiCo stock.