Investors seeking a consistent passive income often look to the Dividend Kings, companies that have increased dividends for at least 50 consecutive years. PepsiCo (NASDAQ:PEP), a consumer goods giant known for its snacks and drinks, is one such company. Despite its recent disappointing earnings report, some investors see this as an opportunity to buy this Dividend King at a discount.

Over the past year, PepsiCo’s stock has underperformed the market, down about 5%. The stock is down more than 2% in 2024, compared to a 5.5% gain for the S&P 500 Index.

In its latest earnings report for Q4 2023, PepsiCo reported adjusted EPS of $1.78, beating expectations, but revenue of $27.85 billion fell short. The company’s organic revenue growth forecast of 4% for fiscal 2024, along with an 8% growth expectation for EPS, also missed analysts’ expectations, leading to a 3.5% drop in the stock price.

Despite this, PepsiCo’s shares are now reasonably priced. It trades at a forward price/earnings multiple of 20.58, below its five-year historical average of 24.53. The price/sales multiple of 2.42 is also lower than its historical mean of 2.76. The current dividend yield is just over 3%, supported by 51 years of consistent growth and a reasonable payout ratio of less than 65%.

PepsiCo is also expanding its reach globally, particularly in India, where it plans to increase its capacity by more than 25% with Varun Beverages, its bottling partner. Analysts have remained positive on PepsiCo’s growth prospects, with Citi upgrading the stock to “Buy” and TD Cowen reiterating an “Outperform” rating. They believe that despite current challenges, PepsiCo’s strong brands, packaging flexibility, and importance to retailers will help it navigate the market dynamics.

Overall, PepsiCo stock has a “Moderate Buy” consensus rating from 17 analysts, with an average 12-month price target of $190.40, implying an expected upside of 14.5% from the current levels.

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