This Dividend King Yielding 4X the S&P 500 Looks Like a Buy Right Now

Key Points

• PepsiCo is mired in a well-documented slump.
• That slide may be compelling investors to overlook some positive attributes of this dividend darling.
• A dividend yield that’s more than quadruple that of the S&P 500’s could be enticing to income investors.
• 10 stocks we like better than PepsiCo ›

If you feel like growth and technology stocks always get all the attention, you'd be wrong. In reality, it's really been closer to a decade. But investors can be forgiven for feeling as though it's been an eternity. And to be fair to these sectors, they have proven worthy of attention, with many growth and tech stocks delivering jaw-dropping long-term returns.

All that hype, however, has caused even some of the largest consumer staples companies by market cap to go overlooked. Even worse, stocks like PepsiCo (NASDAQ: PEP) aren't flying under the radar, but are getting added attention for all the wrong reasons. In PepsiCo's case, that's meant the beverage giant returned a measly 3.3% over the past five years compared to the S&P 500, which gained 84.2%. In 2026, things didn't get any easier for this consumer staples stock. Year-to-date, it's trading down 2.1% while the S&P 500 is up 12.2%.

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But there are glimmers of hope that suggest Pepsi can get back to rewarding long-term equity income investors.

For PepsiCo, just the dividend facts, please

In investing, facts are the only thing that matters. These are the PepsiCo dividend facts. It's a Dividend King, or one of the companies with an annual payout increase streak exceeding 50 years. In PepsiCo's case, we're talking about 55 straight years of boosted dividends.

Another fact is that the stock yields 4.3%, or more than quadruple the dividend yield on a basic S&P 500 exchange-traded fund (ETF). Critics could argue that while PepsiCo's yield is certainly above average, it's not attractive when 10-year Treasuries yield 5%. After all, Treasuries are safer than stocks, but PepsiCo offers better odds of long-term price appreciation.

Even if the Federal Reserve hikes interest rates again before the end of this year, sending bond yields higher, it doesn't need to be a thorn in the side of PepsiCo shares. Yes, higher rates can cool consumer spending, but usually on the cyclical side. Defensive staples can weather rate hikes because consumers will continue spending on essential items.

Additionally, some experts view PepsiCo as an undervalued wide-moat stock capable of growing its dividend at a mid-single-digit rate each year over the coming decade.

Youthful appeal

Undoubtedly, PepsiCo is an old company. The beverage originally known as "Brad's Drink" was concocted in 1893, but that doesn't mean Pepsi doesn't resonate with younger consumers today. It does, and that adds to the case for considering the stock. Pepsi and Gatorade, which PepsiCo owns, are 2 of the top 5 beverage brands among Gen Z. Another name in the top 10 is Lipton, which PepsiCo distributes.

In keeping with the theme of PepsiCo's inroads with young consumers, the company increased its stake in Celsius Holdings (NASDAQ: CELH) to 11% in August 2025. That's widely known, but what may not be fully appreciated is just how smart it is for PepsiCo to be engaged with a youthful purveyor of caffeinated energy drinks.

As analysts at Morgan Stanley point out, domestic spending on caffeinated drinks has risen 6% annually, but energy drinks are the leader with 8% yearly growth in spending terms. The analysts add that the largest increases in energy drink consumption are among the 25-34 and 35-44 age cohorts. Interestingly, the GLP-1 drug phenomenon isn't denting energy drink demand. It's having the opposite effect, suggesting PepsiCo's relationship with Celsius could be beneficial in the long run.

Should you buy stock in PepsiCo right now?

Before you buy stock in PepsiCo, consider this:

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Todd Shriber has no position in any of the stocks mentioned. The Motley Fool recommends Celsius Holdings. The Motley Fool has a disclosure policy.