Count on Dividend King Pepsi (PEP) for Stability in a Volatile Market

The stock market has been volatile to kick off 2025, with many top tech stocks well off 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, like beverage and snack company Pepsi (PEP) and its steady 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 many decades, its modest valuation, and the durable demand for its products.

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Favorable Valuation

There’s little question Pepsi is a blue-chip stock since 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 trades at a premium, blue-chip valuation.

In fact, after declining 12.8% over the past year, shares of Pepsi fetch just 17.8 times 2024 full-year earnings estimates and an even cheaper 16.9 times December 2025 consensus earnings estimates. These numbers make Pepsi significantly cheaper than the broader market, as the S&P 500 (SPX) currently trades for 24.8 times earnings. Interestingly, Pepsi is also cheaper than its archrival Coca-Cola (KO), which trades for 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 a multiple expansion in a bullish market environment, especially since the stock has frequently traded at higher P/E ratios over the years.

Over Five Decades of Dividend Growth

In addition to this inexpensive valuation, Pepsi is a top dividend stock. It starts with the dividend yield — Pepsi currently yields an enticing 3.7%, which is nearly triple the S&P 500’s 1.3% yield.

Pepsi's dividend growth history is nothing short of impressive. The company has paid consecutive quarterly dividends since 1965 and increased its annual dividend for 52 straight years. This places PepsiCo among the top dividend growth stocks in the market. While PepsiCo's dividend growth rate has been relatively modest compared to some other Dividend Kings, its consistent dividend growth and attractive yield make it a strong choice for income-oriented investors.

What factors contribute to Pepsi's ability to maintain and grow its dividend?

Pepsi's ability to maintain and grow its dividend is driven by several factors:

1. Strong Cash Flow Generation: PepsiCo generates substantial cash flow, which enables it to pay and increase its dividends. In 2024, the company is expected to pay $7.2 billion in dividends and repurchase $1 billion of its shares, while maintaining a strong balance sheet with about $8 billion in cash and a low leverage ratio (Navellier, 2025).
2. Consistent Revenue and Earnings Growth: PepsiCo has a history of delivering steady revenue and earnings growth, which supports its dividend increases. The company expects to achieve low-single-digit organic revenue growth and at least an 8% rise in earnings per share in 2024, in line with its long-term targets of 4% to 6% organic revenue growth and high-single-digit earnings-per-share growth (Navellier, 2025).
3. Expanding Product Portfolio and Geographic Reach: PepsiCo continues to invest in growing its business by expanding its product offerings, reducing sugar and sodium, and entering new markets. The company estimates the global beverage and convenient food opportunity is over $1.2 trillion, providing a long runway for growth (Navellier, 2025).
4. Acquisitions and Strategic Investments: PepsiCo uses its strong balance sheet to make acquisitions that enhance its ability to grow. Recent acquisitions include Garza Food Ventures (Siete Foods) and the remaining 50% interest in the Sabra and Obela products, which have enabled the company to diversify its food portfolio and offer consumers more choices (Navellier, 2025).
5. Dividend Payout Ratio: PepsiCo's dividend payout ratio, which is the percentage of earnings paid out as dividends, is relatively low. In 2024, the company is expected to pay out around 60% of its earnings as dividends, leaving room for future dividend increases without compromising its earnings growth (Navellier, 2025).

These factors combined enable PepsiCo to maintain and grow its dividend, making it an attractive choice for income-oriented investors.

How does Pepsi's valuation compare to its peers and the broader market?

Pepsi's valuation is relatively inexpensive compared to its peers and the broader market. As of January 19, 2025, Pepsi's P/E ratio is 21.865782, which is lower than the S&P 500's P/E ratio of 24.8 and Coca-Cola's P/E ratio of 20.9. This inexpensive valuation suggests that Pepsi may have a strong degree of downside protection in a volatile market and leaves room for a multiple expansion in a bullish market environment.



In conclusion, PepsiCo's attractive dividend yield, long history of dividend growth, and modest valuation make it an appealing choice for investors seeking stability in a volatile market. The company's strong cash flow generation, consistent revenue and earnings growth, expanding product portfolio, strategic acquisitions, and low dividend payout ratio contribute to its ability to maintain and grow its dividend. With an inexpensive valuation compared to its peers and the broader market, PepsiCo offers a compelling investment opportunity for income-oriented investors.