The stock market was volatile at the start of 2025, with many top tech stocks trading well above their peaks as some investors questioned their high valuations and an uncertain economic environment. But 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, long and proud history of consistent dividend growth over many decades, modest valuation, and sustainable demand for its products.
There is little doubt that Pepsi is a blue chip stock, as 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 is trading at a premium, blue chip valuation.
After falling 12.8% over the past year, Pepsi’s shares are fetching just 17.8 times full-year 2024 earnings estimates, and an even cheaper 16.9 times consensus December 2025 earnings estimates. These numbers make Pepsi significant 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 archrival Coca-Cola (KO), which trades at 20.9 times 2025 earnings estimates.
This cheap valuation should provide Pepsi with a strong degree of downside protection in a volatile market and leave plenty of room for multiple expansion in a bullish market environment, especially since the stock has often traded at higher price-to-earnings multiples over the years.
In addition to this cheap valuation, Pepsi is a top dividend stock. It starts with the dividend yield: Pepsi currently yields an attractive 3.7%, which is almost triple the S&P 500’s 1.3% yield.
In addition to its above-average yield, Pepsi is an 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 has increased the size of the payout in each of those 52 years. This consistency makes Pepsi a “Dividend King” and puts it in the rare company of stocks that have increased their dividend payments for at least 50 years in a row. Other notable Dividend Kings include Coca-Cola, Target (TGT), Johnson & Johnson (JNJ), AbbVie (ABBV) and Walmart (WMT).