If you’re seeking fast-growth stocks in 2023, PepsiCo (NASDAQ:PEP) stock probably isn’t what you’re looking for. The stock still earns a confident “B” grade, however, as a rock-solid defensive play that should appeal to dividend investors of all stripes.
Chances are excellent that you’re familiar with PepsiCo’s portfolio of famous beverage and food brands. Even during times of economic turmoil, families will continue to indulge in snacks and a soda.
What about times of “sticky” inflation, though? Will people continue to buy PepsiCo’s products even if they cost more? Actually, the answer is definitely yes, and that’s good news for PepsiCo and its shareholders.
Reasons to Consider PEP Stock
First and foremost, investors can counterbalance their hyper-growth stocks with a share position in Pepsi. Unlike some tech-market high flyers, PEP stock holds up fairly well during times of economic turmoil.
PepsiCo has a terrific track record of EPS beats. This track record was upheld in 2023’s second quarter, when PepsiCo earned $2.09 per share, beating Wall Street’s call for $1.96 per share.
PepsiCo has consistently increased its dividend payouts, year after year. The company currently pays a forward annual dividend yield of 2.65%, which surpasses the sector average dividend yield of 2.125%.
And by the way, PEP stock is down from its 52-week high of nearly $200. This should pique the interest of value seekers and contrarian investors.
People Are Willing to Pay More for PepsiCo’s Snacks
Not long ago, The Wall Street Journal reported on the phenomenon of snack producers, such as PepsiCo, raising their prices. We can blame inflation, supply-chain disruptions or any other contributing factors, but snack-price increases are probably here to stay.
Yet, the American consumer has been resilient in the face of persistent price inflation. Evidently, people are willing to pay for PepsiCo snacks, such as Doritos and Cheetos, even after the prices go up.
Thus, as the WSJ put it, PepsiCo’s quarterly results showed “strong growth in sales and profit as consumers continued to shrug off price increases” of these snack products.
It might seem counterintuitive, but inflation didn’t seem to hurt PepsiCo’s bottom line, and may have even boosted it.
We already mentioned PepsiCo’s second-quarter 2023 EPS beat. It’s also worth noting that PepsiCo generated $22.3 billion in quarterly revenue, surpassing Wall Street’s forecast of $21.7 billion.
Looking ahead, PepsiCo raised its full-year 2023 organic revenue growth outlook to 10%, from its previous guidance of 8% growth.
Feeling Defensive? Take a Look at PEP Stock.
PepsiCo isn’t trying to make its shareholders rich overnight. Rather, the company is dedicated to rewarding its loyal investors for the long run.
Granted, it might seem counterintuitive that consumers will tolerate snack-price increases. Yet, apparently they’re paying more for these products, and PepsiCo’s results and forward guidance reflect the company’s convincing performance and optimism.
So, don’t assume that “sticky” food-price inflation is an insurmountable problem for PepsiCo in 2023. Ultimately, PEP stock gets a “B” grade because it might not appeal to investors seeking hyper-growth, but it’s a solid defensive play with decent dividends as a nice bonus.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
