PepsiCo (PEP): 54 Years of Dividend Increases and Still Trading Below Fair Value

PepsiCo is one of those rare companies where the name barely scratches the surface of what the business actually does. Sure, they make Pepsi and Mountain Dew. But the real empire is much bigger than soda. PepsiCo owns 23 brands that each generate over a billion dollars in annual sales – names like Lay’s, Doritos, Gatorade, Quaker Oats, Cheetos, Tostitos, and SodaStream. They also hold a 39% stake in Tropicana. Altogether, the company pulls in roughly $94 billion a year in revenue and employs around 310,000 people worldwide. It was born from the 1965 merger of Pepsi-Cola and Frito-Lay, though Pepsi-Cola itself dates back to 1898.

Here is something that might surprise you: the snack and food side of the business – Frito-Lay and Quaker combined – actually accounts for about 59% of total revenue. PepsiCo is really a snack company that also sells drinks.

Latest Earnings and Business Update

On February 3, 2026, PepsiCo announced a 4.0% dividend increase, bringing the annualized payout to $5.92 per share starting in June. That extends the company’s streak to 54 consecutive years of dividend raises – well into Dividend King territory.

For the fourth quarter of 2025 ending December 31, revenue climbed 5.6% to $29.3 billion, topping analyst estimates by about $370 million. Adjusted earnings per share came in at $2.26, up nicely from $1.96 in the prior year. The full-year picture was more measured: total revenue grew 2.3% to $93.9 billion, while full-year adjusted EPS of $8.14 was essentially flat compared to 2024’s $8.16.

Digging into the segments reveals the usual push-and-pull you see in a global consumer staples giant. Organic revenue (which strips out currency effects and acquisitions) rose 2.1% for the year. In the quarterly results, food volume dipped 2% while beverage volume inched up 1%. PepsiCo Beverages North America saw revenue grow 2% even though volumes fell 4% – meaning they are getting more per unit sold, which reflects pricing power. Foods North America slipped 1%. Internationally, the picture was mixed: beverages grew 2% on 3% volume gains, Europe and the Middle East/Africa rose 5% despite a 7% currency headwind, Latin America Foods jumped 5%, and Asia Pacific Foods climbed 4%.

Looking ahead, management expects 2026 organic sales growth of 2% to 4% and earnings-per-share growth of 4% to 6%.

Why This Company Stands Out

PepsiCo is the textbook example of a defensive stock. When inflation spikes, people cut back on vacations and electronics – but they still buy chips and soda. When a recession hits, Lay’s and Gatorade keep selling. That resilience is not just theoretical. PepsiCo has powered through every economic downturn of the past half-century while continuing to raise its dividend.

The company’s global footprint gives it enormous pricing power and supply chain advantages that smaller competitors simply cannot match. If commodity costs rise, PepsiCo can absorb the hit better than anyone and gradually pass increases along to consumers who have deeply ingrained brand loyalty.

There is also a strategic pivot underway. The company’s “PepsiCo Positive” initiative is shifting the portfolio toward healthier, more sustainable products – a recognition that consumer preferences are evolving. This is not a charity project; it is a long-term positioning play to stay relevant as health-conscious eating trends accelerate globally.

The dividend payout ratio sits at about 69%, which is higher than some of the other companies we cover, but entirely reasonable for a mature consumer staples business throwing off massive and predictable cash flows.

Growth Outlook and Valuation

Over the past decade, PepsiCo has compounded its earnings at roughly 5.9% per year, and that rate has actually accelerated to 6.4% over the most recent five years. The growth comes from a combination of organic revenue expansion (pricing power plus modest volume gains) and consistent share repurchases that concentrate earnings among fewer outstanding shares. A 6% forward growth rate seems like a reasonable expectation.

Now, here is the part that should catch your attention. PepsiCo shares currently trade at a P/E of about 19.4. For context, the stock’s fair value P/E is closer to 24. That gap means shares are trading roughly 18% below where they should be, implying about 4.3% in annual returns just from the valuation normalizing. This is unusual for a blue-chip Dividend King – these companies rarely go on sale.

Add the 3.6% dividend yield, 6.0% expected earnings growth, and 4.3% from multiple expansion, and the math points to approximately 13.3% in annual total returns through 2030. For one of the most reliable businesses on the planet, that is a compelling entry point.

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