Key Points
Earlier this year, PepsiCo reduced prices by as much as 15% to lure back price-conscious consumers.
The company's dividend yield is above 4%.
PepsiCo has consistently paid (and raised) dividends to shareholders for more than 54 years.
The soda has gone flat in 2026, so to speak, as shares of PepsiCo (NASDAQ: PEP) are trading down about 14% over the past six months. The beverage and snack company's third-quarter results weren't bad. Still, management cut its full-year guidance for adjusted earnings per share, as North American sales aren't recovering as quickly as anticipated.
Earlier in the year, PepsiCo cut prices on some of its core brands, such as Lay's and Doritos, by up to 15%. This price reduction was to lure value-sensitive consumers back to Pepsi's top products. Now, management is changing its tune and plans to raise prices modestly in 2027. This has the potential to hurt sales again.
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Other headwinds include higher prices across the supply chain due to inflation, tariffs, and increased transportation costs. All of these challenges have caused the stock to fall over the past year, but there is a case to be made for patient investors.
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PepsiCo's international business is performing well, and the reduced guidance sets a lower bar for the company to clear next quarter. As for the stock itself, the metrics look reasonable. The stock is trading at approximately 15 times forward earnings, and has a price-to-sales ratio slightly under 2. Both suggest the stock is fairly priced.
PepsiCo is a Dividend King, which is a stock that has increased its dividend for at least 50 consecutive years. The company's current dividend yield is more than 4%. For income-focused investors, or those willing to patiently wait out the tough macroeconomic headwinds, PepsiCo is a solid defensive consumer goods stock.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.