Daniel Foelber, The Motley Fool

Thu, May 15, 2025, 7:15 AM6 min read

• The beverage and snack food giant just raised its dividend for the 53rd consecutive year.

• Unfortunately for frustrated investors, the stock price has gone practically nowhere for five years.

• Pepsi’s dirt-cheap valuation and strong portfolio of brands make it a no-brainer buy today.

• 10 stocks we like better than PepsiCo ›

It's been a rough go of it for PepsiCo (NASDAQ: PEP) investors lately. The stock is hovering around a five-year low and is down over 27% in the past year.

Despite the downward pressure on the stock price, Pepsi has continued to raise its dividend like clockwork. Earlier this month, it boosted its quarterly payout to $1.4225 per share or $5.69 per year -- marking the company's 53rd consecutive annual dividend increase.

Pepsi stock now sports a forward yield of 4.4% -- the highest ever. Here's why I think its yield just peaked and why the dividend stock is a no-brainer buy now.

Pepsi is part of an elite group known as Dividend Kings -- companies that have increased their payouts for at least 50 consecutive years.

The yield will increase when a company's stock price grows more slowly than its dividend. Whereas if a stock price goes up faster than the dividend growth rate, the yield will go down. In this vein, dividend yield can be misleading. A company can have a steadily growing and dedicated dividend program, but a low yield because the stock price does well.

For example, Microsoft has increased its dividend every year for 15 consecutive years, and most of its recent raises have been about 10% per year. But its yield has gone down over time because the stock price has increased by several fold.

In contrast, Pepsi's dividend yield has gone up because the company continues to boost its payout and its stock price has gone down. It wasn't long ago that Pepsi sported a yield of around 2% to 3%. But over the last five years, Pepsi has increased its dividend by 39%, but the stock price is flat -- pushing the yield to where it is today at a record high.

I could see Pepsi's yield peaking here for the simple reason that its stock price will grow faster than its dividend growth rate, which should be about 5% to 7% per year based on the size of Pepsi's recent increases.

Pepsi stock has fallen deeper and deeper into the bargain bin mostly because of sluggish sales growth and limited pricing power. Pepsi has a massively diversified business spanning beverages like flagship Pepsi and other soda brands, juices, water, sports drinks, energy drinks, and more. It also owns one of the largest snack brands in the world -- Frito-Lay -- and package food giant Quaker Oats.