Key Points
PepsiCo has a 4.1% forward dividend yield and has raised payouts for 54 consecutive years.
To generate $500 in annual dividend income, all you need to invest is a little over $12,000.
Despite recent challenges, including weak growth domestically, an ongoing turnaround could give way to greater growth, not to mention a possible sharp rebound for PepsiCo shares.
For income-focused investors, PepsiCo (NASDAQ: PEP) could be a strong choice for both yield and dividend growth. Shares in the food and beverage company have an effective dividend yield of around 4.1%. The company also has 54 years of consecutive annual dividend increases under its belt.
This makes it one of the Dividend Kings, or stocks with more than 50 years of consecutive dividend growth. While facing continued headwinds, these "problems" could actually be working in the favor of long-term investors.
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Buy this many PepsiCo shares for $500 in annual dividend income
Each quarter, PepsiCo pays $1.48 per share in dividends. Annually, this comes out to $5.92 per share in dividends. To generate $500 in annual dividend income from a PepsiCo position, you would need to purchase around 85 shares. At Nov. 5's prices, that means a $12,105.70 investment.
Compare that to the S&P 500 index (SNPINDEX: ^GSPC). With PepsiCo's dividend yield over three times that of the major market index, you need to invest just over $45,000 in the S&P 500 just to generate a similar level of dividend income.
Don't let headlines and headwinds scare you away
For much of 2026, PepsiCo shares have trended lower, hit hard by negative developments such as weak U.S. growth and news of major customer losses, including the decision by Yum! Brands' KFC chain to switch from serving Pepsi products to Coca-Cola (NYSE: KO) products in its domestic restaurants.
Despite dumping the brand from KFC, Yum plans to keep serving Pepsi products at its Taco Bell restaurants. Even as management conceded that a domestic turnaround remains ongoing, investors reacted positively to news of strong international sales and management's plans to expand its cost-cutting efforts.
If the turnaround proves successful, the stock will bring its 73% forward payout ratio to more sustainable levels. Increased profitability could also help the stock, valued at just 16 times forward earnings, bridge the valuation gap with Coca-Cola, which trades at 27 times forward earnings.
In short, view Pepsi's headlines and headwinds as factors allowing you to enter a long-term position at a reasonable price.
Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Yum! Brands. The Motley Fool has a disclosure policy.