The stock market has been volatile at the start of 2025, with many top tech stocks far 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, such as beverage and snack company Pepsi ( PEP ) and its steady dividend growth. I’m bullish on Pepsi stock based on its attractive dividend yield, long and proud history of steady dividend growth for decades, modest valuation and sustained demand for its products.
There is little question that Pepsi is the stock with the greatest success since it is an iconic American company with a name and logo that are instantly recognizable to billions of people around the world. However, this does not mean that the stock is trading at a high, blue valuation.
In fact, after falling 12.8% over the past year, Pepsi stock trades at just 17.8 times full-year 2024 earnings estimates and an even cheaper 16.9 times December 2025 consensus earnings estimates. These numbers make Pepsi significantly cheaper than the broader market, such as the S&P 500 (SPX) currently trades for 24.8 times earnings. Interestingly, Pepsi is also cheaper than its biggest rival Coca-Cola ( KO ), which trades for 20.9 times its estimated 2025 earnings.
This cheap valuation should give Pepsi a strong degree of downside protection in a volatile market and leave plenty of room for multiple expansion in a relaxed market environment, especially since the stock has often traded at higher P/E ratios over the years.
With this cheap valuation, Pepsi is top dividend stocks. It starts with a dividend yield – currently Pepsi yields a tempting 3.7%which is almost three times the S&P 500’s return of 1.3%.
Beyond the above-average crop, Pepsi is attractive dividend stock based on its decades-long commitment to paying and growing its dividend. Pepsi has paid dividends to its shareholders for 52 years in a row, and in each of these 52 years, it has increased the amount of its payout. This consistency makes Pepsi the “dividend king,” placing it in a rare group of stocks that have increased their dividend payouts for at least 50 consecutive years. 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 increasing its dividend like clockwork every year.
There is some concern among investors that consumer demand for carbonated soft drinks will decline in developed markets such as the United States, but Pepsi is quite well positioned for this risk. Carbonated soft drinks have a lot of growth opportunities in international and emerging markets. In addition, Pepsi’s portfolio of brands offers a variety of beverages for developed market consumers 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 over $250 billion a year, with leading brands like Doritos, Cheeto’s, Lay’s, Fritos and Volani all in his arsenal.
Late last year, the company also announced a deal to buy the 50% of Saber (best known for its hummus, as well as other dips and spreads) it didn’t already own, as well as a $1.2 billion deal for the tortilla chip maker. Siete, illustrating that the company is focused on long-term growth in this area.
Another nice thing about Pepsi is that it is a company that produces products that enjoy sustained consumer demand. 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 be forced to delay or forgo big-ticket purchases, but a six-pack or case of Pepsi or Diet Pepsi still represents only a small percentage of their budget that is unlikely to shrink.
The same can be said for the aforementioned savory and salty snacks sold by Pepsi or staples like Quaker Oats oatmeal.
As for Wall Street, analysts have a moderate buy consensus rating on PEP stock based on four buys, three holds and zero sells assigned over the past three months, as shown in the chart below. After a share price drop of 9 percent during the last year, average target price of PEP of $167.86 per share implies 13.6% upside potential.
I am bullish on Pepsi based on its attractive, above-average 3.7% dividend yield and its long and proud history of increasing its dividend payout for more than five decades. In a market that is hot and cold and where trends can be fleeting, this kind of long-term reliability is something to celebrate.
I’m also bullish on Pepsi stock based on its below-average valuation—which should give investors decent downside protection and plenty of upside exposure—and its strong consumer staples business with sustained demand. This gives the stock a strong defensive backbone.
