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Russian (RU) Jon Quast, The Motley Fool
Mon, May 5, 2025, 2:02 AM 5 min read
In This Article:
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PepsiCo is a strong business facing economic uncertainty, which could actually be a bigger problem for its smaller competitors.
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The company's dividend is historically one of the greatest on the stock market, and the dividend yield has never been better than right now.
In 1972, former U.S. President Richard Nixon was reelected to the nation's highest office. There have been 13 presidential elections since then as well as nine presidents, a testament to just how much time has passed. But even though this is a long time period, beverage and snacks company PepsiCo (NASDAQ: PEP) is about to do something that it's been doing every single year since then.
Pepsi already announced that it will raise its quarterly dividend payment by 5% in June. The company has been paying a dividend since 1965. But this year will be the 53rd straight year that it not only paid the dividend but also raised the dividend.
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Once a company has increased its dividend for 50 consecutive years, it's known as a Dividend King. And as a Dividend King, few companies have longer streaks than PepsiCo. This makes it one of the best dividend stocks in the world, historically speaking.
However, Pepsi stock is down more than 30% from its all-time high. Over the last 10 years, investors made more than twice as much money by investing in an S&P 500 (SNPINDEX: ^GSPC) index fund than they would have by investing in PepsiCo stock directly.
With everything going on in the global economy, investors aren't overly excited about Pepsi's prospects at the moment. There's validity to those concerns. That said, I believe that dividend investors might need to give PepsiCo stock a careful look right now.
With any dividend investment, the main question is: Will this company keep paying a higher and higher dividend in the future?
The first consideration is whether a company is committed to its dividend. Some choose to start paying one and later decide to invest that money elsewhere. But in PepsiCo's case, its dividend is clearly a priority after a streak of more than five decades. That's very unlikely to change.
The second consideration is whether a company has the means to keep growing its dividend. Businesses that stumble -- whether through economic changes or their own missteps -- often need to cut their dividends to survive. I believe some investors question how much PepsiCo will struggle to pay its dividend in the near future.
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