This Dividend Aristocrat Is a Buy—Here’s Why

PepsiCo is a dividend stock to buy for several reasons, from our perspective. The company is in excellent financial health, and its dominant portfolio of brands has allowed it to carve out a wide economic moat. It operates in the consumer defensive sector, which has been outperforming the broad market in 2025 as uncertainty about tariffs and the economy persists. The company is a dividend aristocrat, which means it has increased its dividend for at least 25 consecutive years—and we expect the dividend to grow 6% annually through 2033. The cherry on top: This high-quality stock with a growing dividend is attractively priced. Pepsi lands on our list of The 10 Best Dividend Stocks. This dividend aristocrat is also a top pick of Morningstar chief US market strategist Dave Sekera, who called Pepsi “a good, solid value stock in today’s market” in a recent episode of The Morning Filter podcast.

Following years of anemic growth caused by operational missteps and underinvestment, management has worked to right PepsiCo’s ship, driving steady top-line and profit expansion. But we think there is more room to go as the company benefits from secular tailwinds in the snack business, growth initiatives in select attractive beverage subcategories (like energy drinks) and various emerging markets (such as Latin America, Africa, and Asia-Pacific), and an integrated business model facilitating more-effective commercialization. Demand for snacks and beverages tends to remain resilient through economic cycles, and a large end-to-end supply chain gives Pepsi better control over execution, helping to shield its operations from external shocks. We expect the company to be able to navigate the evolving competitive landscape while enhancing its returns.

Key Morningstar Metrics for PepsiCo

• Fair Value Estimate: $170
• Star Rating: 4 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: Low

Economic Moat Rating

PepsiCo has a wide economic moat thanks to an impressive ensemble of household brands underpinning consumer loyalty and close retailer relationships, as well as significant scale benefits that bring bargaining power and lower operational costs. PepsiCo is number one in the $242 billion global savory snacks market, thanks to brands like Lay’s, Cheetos, and Doritos. It’s also the world’s second-largest beverage provider behind Coca-Cola. With a revenue base of $92 billion in 2024, PepsiCo commands significant bargaining power in procurement, from raw materials to advertising services. We expect PepsiCo will generate returns on invested capital including goodwill averaging 21% over our explicit 10-year forecast period, compared with a weighted average cost of capital at 7%.

Read more about PepsiCo’s moat rating.

Fair Value Estimate for PepsiCo Stock

Our $170 fair value estimate incorporates management’s outlook for low-single-digit increases in organic sales and adjusted earnings per share in 2025. We expect 2025 sales and adjusted EPS to grow 1.9% and 2.1%, respectively. Our intrinsic valuation implies 18.0 times 2025 adjusted EPS and an enterprise value/EBITDA multiple of 16.5 times. Over the next 10 years, we forecast the top line to grow at midsingle digits annually. We expect mid-single-digit growth in snack revenue, while beverage sales grow at a low-single-digit clip. We expect operating margin to widen by 220 basis points and gross margin to expand roughly 90 basis points by the end of our 10-year forecast period, relative to 2024.

Read more about PepsiCo’s fair value estimate.

Risk and Uncertainty

Exposure to international markets with diverse economic and demographic trends puts to the test PepsiCo’s ability to adapt to a rapidly evolving operating environment and address issues ranging from currencies and cost inflation to labor relations and geopolitical tension. Given growing health awareness among consumers, PepsiCo also faces the challenge of keeping a delicate balance between taste appeal and health considerations. With the ubiquity of smartphones and social media, food and beverage brands are constantly under the scrutiny of consumers.

Read more about PepsiCo’s risk and uncertainty.

PepsiCo Bulls Say

• Demographic and lifestyle shifts could fuel global snack consumption beyond our expectations.
• Even as carbonated soft drink volume wanes in mature markets, the diversity of Pepsi’s beverage portfolio should offer growth opportunities in both developed and emerging markets.
• Despite its close relationships with brick-and-mortar retailers, PepsiCo has invested in omnichannel capabilities and a digitally enhanced supply chain that position it for growth even as consumer shopping patterns bifurcate further.

PepsiCo Bears Say

• Shifting consumer preference to healthier snacks and beverages may impede the company’s ability to pass on higher costs in price increases, weighing on margins and returns.
• Integrating acquisitions in regions where PepsiCo has less experience may distract management attention from its long-term strategic course.
• The shortage of bottlers with sufficient scale and experience in international markets will continue to hinder PepsiCo’s efforts to narrow the gap with Coca-Cola.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of March 4, 2025.