Even if the stock market sells off in 2025, 1 super-safe high-yield dividend king stock to buy
One of the most important lessons you can learn as a long-term investor is to understand what drives the market. In 2023 and 2024, large-cap growth stocks will be largely responsible for propelling the broader index to new heights.
Those who don’t want to ride the stock growth wave have benefited from attractive interest rates on Treasury bills, certificates of deposit, or high-yield savings accounts. In this environment, high-yield dividend stocks simply aren’t that attractive.
But during a stock market selloff, high-yield dividend stocks can be an investor’s best friend. Dividends provide a way to earn passive income without having to sell shares, and can play a key role when share prices fall.
Pepsi (NASDAQ:PEP) is a high-yield dividend stock hovering near three-year lows. Here’s why patient investors have an excellent opportunity to buy PepsiCo, and why the company is performing well even as the stock market sells off.
In addition to Pepsi, Gatorade, Mountain Dew and dozens of other beverage brands, the snack giant also owns Frito-Lay and Quaker Oats, making it a well-rounded company. But PepsiCo’s growth has slowed as sales declined across its segments and regions. Consumers have been resisting PepsiCo’s price increases for years.
To stimulate demand, PepsiCo offers higher quantities per package, giving its product a higher value relative to other brands. The company isn’t leading its industry, so it’s understandable that the stock price is depressed.
But this is only a fairly minor slowdown for PepsiCo, as its organic sales and profits are still growing at low single-digit rates. So it’s performing well even in a challenging environment and should be able to get back on track and return to solid earnings growth in the next fiscal year.
PepsiCo is able to achieve steady profitable growth regardless of economic conditions because of its diversification into non-alcoholic beverages and snack categories and its highly sophisticated global distribution network. When consumers tighten their budgets, it often means cutting back on bulk discretionary purchases other than low-cost snacks.
When the stock market sells off, PepsiCo can perform well. When investors are optimistic, they are likely to pay a higher price for a company’s expected earnings. However, when investors are pessimistic, they may gravitate toward companies that are already performing well and should continue to perform well regardless of economic cycles. PepsiCo is valued for its marketing and distribution of its existing portfolio of snack and beverage brands, making it a solid choice even for pessimistic investors.
