The Best Time to Buy Pepsi in Decades? | PEP Stock Analysis 2026

Today I'm going to be talking about whether PepsiCo is still a good dividend stock to buy in 2026. The company has a long history of consecutive annual dividend increases. It's a dividend king. However, over the past 5 years, the stock price has not been doing well. It's down 13%. And from its peak back in 2023, the stock is down 30%. Now, luckily, PepsiCo is a dividend stock, so they've been paying you dividends all along the way. And if you reinvested those earned dividends over the past 5 years, you would be actually positive 1.86%. But still, this is dramatically underperforming the broader market. In that same time, the S&P 500 has a total return of 79.79%. And SCHD, a popular dividend ETF, has a total return of 57.16%. So PepsiCo, even with dividends reinvested, is trailing the broader market. It's even trailing some of its peers like Coca-Cola. Over the past five years, CocaCola is up 44% just in stock price and from reinvesting dividends, 67.14%. However, this dip in PepsiCo stock price could be an opportunity for a long-term dividend investor. If you're someone who wants to buy reliable dividend income and optimize your entry point in terms of dividend yield, this may be one of the best buying opportunities to buy PepsiCo stock in decades. The current forward-looking dividend yield is 4.33% which is in the 98th percentile over the past 5 years and the only time it was this close was during 2025 when the stock had a massive sell-off. If we look at the alltime this is historically high since the great financial crisis. PepsiCo stock has never been this cheap in terms of its dividend yield. And for high-quality companies you want to be looking for potential dips cuz that can actually be a good entry point. For a while that 2025 dip looked pretty good and you were up a good bit. You were up around 30%. And now you're almost back down to those levels again. So it could be another time to start eyeing up some PepsiCo stock. So today I'm going to give you a full updated analysis on PEP stock. Explain why the company has done so well over the long term. Explain what it is that made the stock such a great compounder in the market over the long term. 15,000% total return going back to 1985, which is 12.8% annually. and throughout. I'm going to be using my stock research tool over at dividendata.com. We just launched the next generation version of the website. We currently have a 50% off sale where you can lock in half off annual membership. The link is in the description and pin comment of the video and this is our founding member deal to celebrate the relaunch of the tool. It's only going to be available for a limited time. But with that said, let's roll the intro and get into today's Pepsi stock analysis. >> [music] [music] >> The following reflects the opinions of a man who spends spends far too much time thinking about stocks. Please do your own research before making any investment decisions. Nothing in this video is personal financial advice. Continue at your own risk. >> My name is Zach. This is Dividend Data, and you should leave a like and subscribe to the channel if you enjoy the video. So, let's talk about that big picture all-time total return for PepsiCo and what's made it a great business. And the reality is that PepsiCo is a large diversified company with some highquality brands and it's a mature high-quality business that's very profitable. They're diversified across both food and beverage owning some of the top brands whether it's Pepsi, Gatorade, Propel, Poppy, Mountain Dew, Starbucks at home drinks, Liptin, and they own top food brands whether it's things like Lays, Tostitos, Quaker, Doritos, even Cheetos. These are consumer staples that have been around for decades. They're not going anywhere and the company has a huge distribution network. So purely in terms of like an economic moat, PepsiCo is in a strong position. They as a company, they'll exist 10 years from now, they'll exist 20 years from now, they'll exist 50 years from now. They are a conglomerate of top food and beverage brands and they operate the distribution network that gets them to all of these grocery and convenience stores. It's an incredibly strong position. And this is a mature business that's been generating high profits for decades and decades and decades. As you can see, they've been generating billions annually in operating cash flow and has slowly grown over time to now 13.46 billion of operating cash flow over the trailing 12 months. And yes, they reinvest in their infrastructure, but over the trailing 12 months, 9.28 billion of free cash flow. And this has allowed them over time to continually pay out dividends to shareholders. As you can see, in fiscal 2025, they paid out 7.64 64 billion to shareholders. And this is why on that alltime chart, a huge part of your total return with PepsiCo stock is the dividends that the company pays you. And if you reinvested those earned dividends every single time you got them, that has a huge compounding effect in the background as you now have more shares paying you more income and they have dividend raises on top of that. So this has actually been a rather predictable total return to get from PepsiCo. Of that 15,000, 9,248% of that is directly attributable to your reinvested dividends. And this has been a mature company for decades. Yet, they've continually been able to raise their dividend payment on an annual basis. Over the past 10 years, the compound annual growth rate of the dividend is 7%. However, this has been slowing in recent years, and that's part of the concern when you're investing in PepsiCo stock. Some of the metrics, the growth is slowing, especially when you compare it to a few of their peers. But that also could be the opportunity in that you're now getting the stock at a cheaper valuation. So the most recent dividend increase for PepsiCo was 4.04%. That is down from 4.98% in the one prior, down from 7.11% in the one before that and down from 10% in the one prior to that. And on a go forward basis, I would assume they actually stay in this lower 4 to 5% range. And why is that? Well, the payout ratio has been getting a little more expensive. Historically, the company's always been in a pretty sustainable range. Over the past decade, usually in that 70 and max, around 90% range, and in 2025, based on EPS, it was 92.7%. And for free cash flow over the past decade, we've been getting close. This used to be a much more conservative payout, but they were raising it faster than their free cash flow was growing. With that said, I'm not super worried about a potential dividend cut. Overall, our software has it graded as a B and this is influenced by its track record of dividend increases and payments. But also, the company has strong cash flow consistently and strong earnings. If we look at the earnings per share for PepsiCo stock, you can see the adjusted EPS over the trailing 12 months is $8.36, which is up 6.23% year-over-year, which is not bad for a mature company. And over the past 10 years, they've grown adjusted EPS 77.87%, which is 6.07% 07% annually and overall 5-year keer 6%. So the company is growing the earnings per share over time. Revenue growth has slowed over the past 3 years, but over the past 5 years it's a 5% kegger. 10 years 4.7%. The company keeps chugging along. Now the part that's concerning and why you saw that payout ratio based on free cash flow climbing. The free cash flow has been close to flat over the past decade. It's up 19.68%. That's a 1.85% 85% compound annual growth rate. It's up a little bit if you look at on a per share basis as they have repurchased some shares. But another factor of why I'm not that concerned about the dividend safety is that in terms of free cash flow, things are actually trending in a better direction lately. You can see the trailing 12 months version which is increasing. That 99% payout ratio is based on the fiscal 2025 and so far we're beating that by a good bit. And the reason was in Q1 they went from a negative $1.58 billion negative free cash flow and they closed that down to negative46 and they had a lot of growth in Q2 relative on a year-over-year basis from $ 1.07 billion to $ 1.51 billion. So this year PepsiCo is actually on track to improve their free cash flow by quite a bit. And we should probably see in fiscal 2026 this free cash flow payout ratio down closer to that 85 or 90% range which is closer to how it was in 2023. So I'm personally not concerned about a dividend cut risk here with PepsiCo. So in terms of the financial picture around PepsiCo I think they're still in a pretty strong position. It's definitely a high quality business. They're just not growing that much. So you can't pay up and pay a premium for the stock if you want a competitive total return closer to the market. And I think in a world right now where there's so much rapid change happening, especially around AI and there's a lot of volatility in that side of the market, if you want to park some of your money in a staple that you know will be here a decade from now, two decades from now, you know it will be highly profitable that entire time. And if you think about it from like first principles, the risk of AI disrupting anything in PepsiCo's business is basically nothing. They own a lot of high-quality brands and it's the distribution network advantage they have. It's a lot of realworld bottling, manufacturing, moving things around to all these different convenience stores and warehouses and grocery stores. And to the degree AI will impact that, it won't be replacing PepsiCo. It will be them leveraging it to help lower costs in their operations. Whether it's self-driving truck deliveries or just using it internally to help their back-end operations, you know, with like all these co-work type applications, improving internal processes, lowering marketing costs like with Coca-Cola, you're seeing AI generated ads now, so they have less cost related to the production of their advertisements. Coca-Cola and PepsiCo, they spend a ton on marketing. Maybe that would help a little bit. But in the big picture when you look at it, it's more so that they have less risk to disruption. But is it a good buy right now? I'll give you a few different ways of looking at that. One, we'll look at it based on dividend yield compared to its historical dividend yield. We'll look at it based on its PE ratio compared to historical P ratios. And then we'll look at it compared to the median or all of the important financial metrics. We have that over here on the value graph tool. I'll give you a look at the intrinsic value of the company doing different methods. Primarily, I think I'll look at the dividend discount model and I'll give you some ideas of what you could expect in terms of price return on PepsiCo from here. So, let's dive right into it. As I mentioned, the dividend yield right now at a 4.33% yield. It's historically high, 98th percentile over the past 5 years, only beaten briefly in June 2025. And over the past 5 years, the median yield for PepsiCo stock is 3%. And if it goes back to that, that would imply a price of $197 for PepsiCo stock, which is up 44%. So purely in terms of dividend yield, this is one of the best entry points you've had for the stock, especially in the past 20 years. In a similar way, I have the PE analyzer on the earnings tab. And this also shows it being a deep value territory over the past 5 years. Trailing 12 months P ratio right now is 17.91. On a forward-looking basis, it's 15.97. This is the cheapest time ever to buy PepsiCo stock in the past 5 years. It is also in the past 10 years. And in the all time, it was only cheaper in the aftermath of the great financial crisis during that 2009 to 2011 period. The median multiple over that time period is 20.91. If you assume that goes back to a 20.91 P ratio, that would imply a $178 share price for PepsiCo, which is up 30% from here. Here you can see analyst estimates for earnings per share growth in the coming years. They're expecting low single digits pretty much annually. So by 2030 that would be $9.97 per share, which at today's stock price would be a 13.7P ratio. And using those analyst estimates and let's say we expect it to be the same 16p ratio it is today. That would imply a 159 share price up 16.7% 3.6% annually. You'd also get the reinvested dividends in that time, but that's not that good of a deal. For PepsiCo to be a good deal from here, you really need a rerating upwards and it needs to trade at a higher P ratio. So, if it trades at a 21p ratio, which is very realistic, it could be up 53% from here or 10.1% annually. And let's say if it got to a 25p ratio, then it could be up 82% by 2030, which would be 14.6% annually. And again, this is just from the price increase. And if we compare PepsiCo stock to where it's traded historically on some of its key metrics. If we look at it based on earnings per share, you can see it's in deep value territory right now where it's far below the implied fair value based on the median. If we look at it based on the dividend, it is also in deep value territory. It's 30% below the implied fair value of the stock based on where the dividend historically has traded at. Same with free cash flow. We're in deep value territory. Same with operating cash flow. We're in deep value territory. In revenue, we're in deep value territory. And again, this is all relative to where the stock has historically traded on all of these metrics over the past five years. So, it's price to sales, its price to operating cash flow, its price to free cash flow, its dividend yield, its P ratio, and I'll also do some intrinsic value estimates here for PepsiCo stock. And I think I'll take a look at the dividend discount model. Now, this is a very conservative way of valuing a company. It's purely basing the intrinsic value on the future dividends that the company will pay you. and it autofilled with PepsiCo's annual dividend per share $5.92 on a forward-looking basis. It autofills with the dividend growth rate. Gives you some options. So the 5-year kegger is 6.6% and let's say we want a 10% annual return. This will give the company intrinsic value of $146.99 which is 7.5% upside from here. However, as I was mentioning earlier, I don't know if they're going to be getting back to that 6.6% annually. So you might want to be more conservative. If we lower that to 5.37, you can see the intrinsic value comes down to $119 a share. And if we do the 4% annually, it goes down even more to $96.96. But again, the dividend discount model is a very conservative way to value a stock, which is projecting out the free cash flow of the company in the future and assigning a present value to that. You can edit all of these variables within it. And basically I'm assuming 5% revenue growth going around to 3% revenue growth. And you can see here the unlevered free cash flow projection. So it's basically projecting it goes to 10 billion 11 billion and then stays in that 11 to 12 range. So let's say you wanted to be around what it is today which is 20.15. This would imply an intrinsic value of $142 which is 4% upside from here. But historically, the median price to free cash flow for PepsiCo has been more like 32. And if you do that, then the stock is significantly undervalued, $224. But in my opinion, a 32 free cash flow multiple, it's definitely pricing the stock at a premium considering this is a low growth company. But historically, a lot of these consumer staples, they have traded at a premium. They haven't been good deals. You can also value it based on a perpetuity growth rate. I have 2.5% here. That would give the company an intrinsic value of $6.93. So, those are my thoughts on PepsiCo stock in 2026. Depending on how you look at it, it could be one of the best buying opportunities in the past decade. And if you're more of a dividend income focused investor and you're a little older and you just want a reliable source of dividend income, this could be a good option. If you're trying to optimize total return and you're trying to potentially beat the market, there's probably other opportunities to look at than PepsiCo, but it's certainly a great business and interesting to learn about. And if you want to use the stock research tool I showed throughout, it's all available at dividenddata.com, link in the description and pin comment. You can get 50% off annual membership right now because of our relaunch, our founding member deal we're offering. It's only going to be available for a limited time. And if you enjoyed the video overall, leave a like, comment, subscribe to the channel, and I'll see you in the next