PepsiCo Stock’s Bear Market: A Value Opportunity for Patient Investors

While the S&P 500 continues to set new records, not every stock is following the upward trend. Case in point: PepsiCo (PEP), whose shares have declined roughly 30% from their 2023 peak. This drop places PepsiCo in its own bear market—a scenario that could appeal to value seekers, contrarian investors, and those focused on dividends and dividend growth.

PepsiCo’s Strength Lies in Its Diversification

PepsiCo stands out as a leading food and beverage company, not just for its flagship sodas, but also for its broad portfolio. Alongside its iconic beverages, PepsiCo is the largest producer of salty snacks through Frito-Lay and boasts a significant packaged foods division with Quaker Oats. This diversified approach allows the company to pursue growth across multiple fronts and weather downturns more effectively than single-product competitors.

A Global Giant with Growth Potential

PepsiCo’s international footprint, strong distribution channels, and effective marketing provide the tools needed to compete on a global stage. The company is also proactive in keeping its brand lineup current through strategic acquisitions, such as probiotic drink maker Poppi and Siete Foods, a Mexican-American food company. These moves ensure PepsiCo stays relevant with shifting consumer preferences.

Furthermore, PepsiCo’s operational success is evident in its Dividend King status—over 50 consecutive years of dividend increases. This rare achievement highlights a resilient business model capable of performing through both robust and challenging markets.

Short-Term Troubles, Long-Term Opportunity?

Currently, PepsiCo faces headwinds, with overall growth slowing and lagging some key industry rivals. The company itself warns that more challenges may lie ahead. Nonetheless, its recent acquisitions demonstrate a commitment to adapting and rejuvenating its growth prospects. Given the scale of PepsiCo’s operations, though, meaningful change will take time.

This period of underperformance has made PepsiCo’s valuation metrics—including price-to-sales, price-to-earnings, and price-to-book ratios—dip below their five-year averages. At around 4.3%, its dividend yield is also near a historical high, suggesting the stock may be undervalued for patient, income-oriented investors.

A Contrarian Bet with Dividend Appeal

Investors with a contrarian mindset may see opportunity as broader sentiment turns cautious on PepsiCo. Despite recent struggles, history shows that PepsiCo and arch-rival Coca-Cola often trade places in terms of performance, making today’s pessimism potentially overdone.

Beyond just market cycles, PepsiCo’s dividend story stands out. The company has compounded its dividend at roughly 7% annually over the past decade, more than doubling payouts. Even if near-term dividend growth moderates, a recovery in fundamentals could accelerate those gains again.

Slow Growth, Steady Returns

While PepsiCo may not single-handedly make investors millionaires overnight, it can serve as a reliable core holding within a diversified portfolio. Its combination of global reach, stable cash flows, and a robust dividend track record makes it a compelling choice for long-term investors—especially now that it’s trading in its own bear market territory.

This content is for informational purposes only and does not constitute financial advice.