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The stock market is in turmoil for geopolitical reasons that risk spilling over into kitchen table problems for everyday consumers. History suggests that this won't stop people from buying the foods they love. That's why right now is a good time to look at consumer staples giants that make food. But there's one consumer staples Dividend King that is in its own personal bear market and offering a historically high yield. It could be the one to buy if you have $10,000 to invest right now.
What does PepsiCo do?
The company in question is PepsiCo (NASDAQ: PEP). Although largely known for its namesake beverages, it operates in the beverage, snack (Frito-Lay), and packaged food (Quaker Oats) categories. It is a strong competitor in packaged food, but it is the No. 2 beverage maker and the No. 1 salty snack company. This consumer staples giant is a vital partner for retailers the world over.
PepsiCo's success shows up most clearly in its status as a Dividend King. First off, it has increased its dividend annually for a huge 53 consecutive years. That doesn't happen by accident. The company has a strong business model that it sticks to in both good times and bad times. Secondly, the annualized dividend increase over the past decade was nearly 8%. That's fairly high, more than twice the historical rate of inflation growth. Put simply, the buying power of PepsiCo's dividend has grown materially in the past decade.
Right now is a bad time for PepsiCo's stock, but that's not because of the market turmoil. PepsiCo is facing headwinds in the snack category, where growth has slowed of late. And investors have pushed the stock lower because the company's top-line growth has slowed after a spike coming out of the coronavirus pandemic. That was an unusual period in which elevated inflation allowed PepsiCo to push through outsize price increases. The stock has fallen 25% from its 2023 highs, which basically means PepsiCo is in its own personal bear market. That drop has pushed the dividend yield to a historically high 3.7%.
PepsiCo is making the right moves to get back on track
The truth is, PepsiCo isn't going to turn its business around overnight. That's just not how things work when a company is as large and diversified as this one. However, management is making the right moves to get growth back on track. And it's using the same playbook that has been so successful over the past 50-plus years.
Times change, tastes change, and beverage and food makers have to adjust. They have to keep their brand portfolios fresh. This is exactly what PepsiCo is doing. The company benefits from its size, which allows it to act as an industry consolidator. Basically, it can buy up-and-coming brands and food concepts to refresh its product lineup.