PepsiCo's stock has declined due to slowing growth, but high dividend yield

From Nasdaq: 2025-03-25 06:08:00

PepsiCo (NASDAQ: PEP) has a long history of profitability, with 52 consecutive years of increasing dividends. However, shares have declined 25% since 2023, the farthest drop since the financial crisis. The company’s growth has relied more on pricing post-COVID, with a 44% increase in potato chip prices and 33% hike in soda prices. While PepsiCo’s volumes slipped, its gross margin remained steady. The stock’s dividend yield is at 3.7%, its highest ever, but investors must watch the valuation closely.

PepsiCo remains a strong company with dependable brands like Pepsi, Doritos, and Gatorade, but slowing growth has led to a drop in stock price and growth expectations. The company’s PE ratio and long-term growth estimates have fallen, making it a less attractive investment for growth-oriented investors. While the high dividend yield may appeal to income investors, the stock may be more appealing at a lower P/E ratio.

The Motley Fool’s Stock Advisor team did not include PepsiCo in its list of top 10 stocks to buy now. Although the company remains a solid investment, investors should consider the lower growth expectations and valuation before investing. The market is adjusting to PepsiCo’s slower growth, reflected in the stock price and dividend yield. It’s essential to assess whether PepsiCo’s current valuation aligns with your investment goals before buying.



Read more at Nasdaq: Is PepsiCo a Buy, Sell, or Hold in 2025?