PepsiCo (PEP) has paid dividends without interruption for over 50 years, making it a reliable income generator for investors seeking steady cash flow.
The beverage and snack giant currently trades (as of January 16) at $146.60 per share with an annual dividend of $5.69, according to data from Yahoo Finance.
That works out to a yield of roughly 3.9%, which beats the S&P 500’s 1.13% yield by a comfortable margin.
Here’s the math: To pocket $1,000 in annual dividends from Pepsi, you’d need to own about 176 shares. At the current price, that’s an investment of approximately $25,800.
But before you write that check, there’s a bigger story unfolding at PepsiCo that every investor needs to understand.
Frito-Lay is grappling with slowing growth Around the World Photos- Shutterstock ·Around the World Photos- Shutterstock
CEO Ramon Laguarta didn’t sugarcoat the situation during recent earnings calls.
The company’s North America food business, which includes the massive Frito-Lay operation, has been struggling with volume declines and margin pressure.
He added, “This business remains a critical driver of shareholder value for PepsiCo and it must deliver much better performance in 2026 versus 2025.”
That’s remarkably blunt language from a Fortune 500 CEO, especially when speaking to Wall Street analysts.
The numbers back up his concerns. Frito-Lay North America saw volume declines in recent quarters as the company shifted away from deep promotional strategies. The business also faced service-level issues early in the year following system transitions.
The sense of urgency became even more apparent when PepsiCo announced Steve Schmitt as its new CFO in November 2025.
Schmitt comes from Target, where he served as chief operating officer. That’s a notable departure from PepsiCo’s usual pattern of promoting from within.
“Steve has a strong and complementary background, having served in finance roles in the retail, restaurant, logistics, and transportation industries, and brings us a fresh perspective,” Laguarta explained.
The timing matters. PepsiCo didn’t wait for its traditional February guidance period to lay out 2026 expectations. Instead, the company issued preliminary targets in early December.
“The message you should take from this is it’s not business as usual here,” Schmitt said during his first earnings call. “Going public with our goals now gives us a head start on the year and makes us accountable.”
That accountability starts with some ambitious targets.
The company is betting big on affordability investments, especially in Frito-Lay North America.
Management has been testing everyday low prices with three major U.S. retailers for the past three months.
The results gave executives enough confidence to roll out broader pricing changes.
“We have very good metrics that gives us the confidence because we’ve seen the results,” Laguarta said. “And now as we have developed the plans for ’26 with our customers, we have the space gains allocated by our customers because we see the volume growing.”
Those space gains translate to more shelf space in stores, which typically drives higher sales.
The second pillar involves aggressive innovation across the portfolio. Lay’s is undergoing a major global relaunch, removing artificial ingredients while maintaining taste. Tostitos and Gatorade are getting similar treatment in early 2026.
Management is also pushing hard into protein-enhanced products:
Pepsi is relaunching Muscle Milk with what it calls better taste and cleaner ingredients.
It’s adding protein versions of Doritos and Quaker products.
Even Propel is getting a protein-focused variant aimed at consumers using GLP-1 medications.
The third piece addresses the cost structure:
PepsiCo is closing older, less efficient manufacturing plants.
It’s consolidating warehouse operations.
The company is reducing headcount in go-to-market operations as the labor market stabilizes.
CFO Jamie Caulfield, who recently announced his retirement after 33 years with the company, noted the benefits will build over time.
“The pace of productivity built as we went out through the year, and we took some of these incremental cost resizing actions,” Caulfield said. “So as you go into 2026, we’re going to have a pretty significant carryover benefit of those actions, particularly in the first half of the year.”
PepsiCo has increased its dividend for 53 consecutive years, earning it Dividend King status.
The blue-chip beverage giant’s annual dividend expense will total $7.85 billion in 2025, which indicates a payout ratio of 86%, which is quite high.
However, as FCF improves steadily over the next few years, the payout ratio will also reduce, providing Pepsi with the flexibility to keep raising dividends.
The bigger question for dividend investors isn’t whether PepsiCo can afford its current payout. It clearly can. The question is whether the company can return to consistent growth that supports future dividend increases.
Activist investor Elliott Management took a stake in PepsiCo and published recommendations for improving shareholder value. Laguarta acknowledged that the engagement has been constructive.
“We’re aligned on one thing, which is critical, which is PepsiCo is undervalued, and there’s a lot of opportunities to improve the valuation of the company by making a few interventions with a sense of urgency,” Laguarta said.
While North America struggles, PepsiCo’s international operations continue expanding at a solid pace.
The international business grew at mid-single-digit rates through most of 2025. September was particularly strong after a weaker summer, which was impacted by weather in several large markets.
“We see that as the summer a bit of a blip and international is back to mid-single digit — high mid-single-digit performance in the last month that we closed,” Laguarta noted.
The company is investing heavily in affordability and brand building in emerging markets. It’s rolling out the Lay’s relaunch globally. It’s expanding Doritos as both a snack and a meal platform, using Formula 1 sponsorships for visibility.
Importantly, management views international markets as a driver of margin expansion over time as these markets scale up.
An investment of $25,800 in Pepsi stock at current prices would generate $1,000 in annual dividend income.
That 3.9% yield looks attractive compared to other alternatives. The dividend has a strong track record and appears well-covered by cash flow.
But investors need to weigh that income stream against the operational challenges facing PepsiCo’s core North American food business.
Pepsi is making aggressive moves to fix the problems.
New leadership is bringing fresh perspectives.
Management is setting specific targets and holding itself publicly accountable.
Whether those changes succeed will determine if Pepsi can return to the consistent growth that made it a dividend favorite in the first place.
