7 Reasons to Buy PepsiCo Stock Like There’s No Tomorrow

If you ever looked PepsiCo (PEP -1.99%) and you wanted the stock price to be lower, then you need to re-examine it right now. While the stock is only about 10% off its high, other metrics suggest that this iconic consumer staples maker is attractively priced today.

A good price for a great company is a great reason to buy PepsiCo stock like there’s no tomorrow. Here are a number of reasons to take advantage of your chance to buy today.

1. PepsiCo is a strong No. 2 in soda

PepsiCo’s namesake brand plays second fiddle Coca colahis namesake — year after year. Don’t take this to mean that Pepsi is somehow a bad brand. Being a strong no. 2 is a very good position in the industry. But PepsiCo is not just Pepsi. It owns a number of major beverage brands, from Gatorade to Muscle Milk. This company is a beverage powerhouse with the size and reach to compete with even its biggest peer.

Image source: Getty Images.

2. PepsiCo is #1 strong in salty snacks

In some ways, the PepsiCo name makes sense, but in others it seems like it’s hiding something very big. That big thing is that PepsiCo owns Frito-Lay, which, unlike Pepsi, is the undisputed leader of its category. That’s right, PepsiCo is the biggest player in the salty snack market. With brands ranging from Lays to Rold Gold, the company’s snacks are a must-have on the shelves of retailers from grocery stores to convenience stores.

3. PepsiCo is also a large producer of packaged foods

As if being #1 in salty snacks and #2 in soda wasn’t enough, PepsiCo also owns Quaker Oats and other notable packaged food brands. To be fair, there are other food manufacturers with much more impressive brand portfolios. But when you add up all that PepsiCo has to offer, you come out with a company that has an incredibly diverse portfolio of brands that people buy every day. That’s exactly what you want to find when you look at consumer staples stocks.

4. PepsiCo is a dividend king

Just having notable brands doesn’t tell you if a company is well run. Still, the fact that PepsiCo is a high-elite dividend king with 52 years of annual dividend increases under its belt is an important clue. A company that is poorly managed has not been able to increase its dividends year after year for over five decades. Note that the last 50 years include some very tough times, such as the raging inflation of the 1970s and the Great Recession of 2007-2009.

Sure, PepsiCo’s financial results have risen and fallen over time, just like any other company’s, but management has kept the business growing through it all. Notably, it also rewarded investors along the way. This is the type of stock you want to have in your portfolio.

5. PepsiCo has a high dividend yield

Speaking of dividends, S&P 500 the index currently gives a miserly 1.2%. The average consumer staples stock is currently yielding 2.6%, using Consumer Staples Select Sector ETF as a proxy. PepsiCo’s dividend yield is about 3%. Can you find higher yielding stocks? Sure! But PepsiCo’s yield still looks quite attractive both on an absolute basis and relative to its broader sector.

6. PepsiCo’s dividend yield is also historically high

But wait, there’s more dividend yield data to check out here. PepsiCo’s dividend yield is near the upper end of its historical range. To be fair, the yield was higher. It was also much lower. Using yield as a rough proxy for valuation, PepsiCo looks pretty cheap today, which is a damn good reason to buy.

PEP dividend yield data by YCharts.

7. PepsiCo’s valuation looks fair to cheap in other ways, too

Most investors don’t just use one valuation metric and call it a day. That’s why it’s worth noting that PepsiCo’s price-to-sales ratio is below its five-year average. The price-to-earnings ratio is roughly equal to the five-year average. The price-to-book ratio is below the long-term average, and the price-to-cash flow ratio is also below the five-year average. Three out of four of the most traditional valuations suggest that PepsiCo is cheap today.

The only value that is not below the five-year average is basically at the five-year average, which suggests a fair price. A fair-to-cheap price is likely a good entry point for a dividend king with an attractive yield and industry-leading positions in key consumer staples markets.

Now is the time to look at PepsiCo

Hindsight is the only way to know when was the perfect time to buy a stock. Unfortunately, investing requires looking to the future. What you do know about PepsiCo is pretty compelling, though. It is an industry leader in several consumer product categories. It has an attractive dividend and dividend yield. And at worst, the stock looks reasonably priced today, but it’s more likely to be a bit cheap. Most investors will likely see this combination and think it’s a good time to buy PepsiCo stock.