PepsiCo Stock Just Had Its Best Day in Over 5 Years. Is The Dividend King a No-Brainer Buy Now?

On July 17, PepsiCo (PEP 3

However, 06%) stock had its best single session in over five years -- gaining 7. 5% after the company reported second-quarter 2025 earnings

It was a sigh of relief for long-term investors who have endured an ext period of underperformance

However, Moreover, Pepsi has raised its payout for 53 consecutive years, earning it a coveted spot on the list of companies that have raised their dividends for at least 50 years -- known as Dividend Kings

Here are some key takeaways from Pepsi's earnings, highlighting why the dividend stock remains a compelling buy for investors seeking to boost their passive income

Image source: Getty Images (noteworthy indeed)

Additionally, Additionally, The worst may be over for Pepsi When Pepsi reported its first-quarter 2025 results in April, the beverage and snack giant slashed its full-year guidance due to revenue and earnings declines

The company cited inflation pressures, consumer demand challenges, geopolitical uncertainties, and tariff headaches

A lot was going wrong for Pepsi, but its quarter showed that the company is heading in the right direction

In the second quarter, Pepsi benefited from a weaker U, in light of current trends

Dollar, which imved its foreign exchange

Nevertheless, Meanwhile, A weaker dollar means that revenue generated in foreign currency goes further when Pepsi reports those results in dollars, in today's market environment

However, In addition to its flagship Pepsi brand, the company owns beverage brands Mountain Dew, Gatorade, Tropicana, and Aquafina

This leads to the conclusion that also owns snack giant Frito-Lay (Lay's, Cheetos, Doritos, Fritos, etc (which is quite significant)

However, ) and Quaker Oats (remarkable data) (noteworthy indeed)

Furthermore, Pepsi has been acquiring a variety of snack brands to diversify its lineup and appeal to health-conscious consumers (an important development)

Furthermore, However, All told, the favorable foreign exchange, paired with decent performance throughout the, gave Pepsi the confidence to confirm its full-year guidance for low-single-digit organic growth and flat earnings

Moreover, It's not great, but it's a step in the right direction for a company that had been experiencing negative growth

Moreover, Meanwhile, Pepsi is revamping its duct lineup Pepsi is doing a good job of focusing on what it can control by in top brands through marketing efforts and adjusting packaging sizes to give customers more options at a lower cost, in today's market environment

On the other hand, Furthermore, On its second-quarter earnings call, Pepsi discussed international cost-cutting efforts, such as closing two plants to better align duction with demand, reducing fixed costs, in its enterprise resource planning system, managing travel and expenses, revisiting third-party contracts, and boosting ductivity

Another big change for Pepsi is shifting its beverage and snack lineup to align with measures by the U

Department of Health and Human Services and U

Nevertheless, Food and Drug Administration to phase out synthetic dyes

Reports indicate that Coca-Cola has agreed to use cane sugar instead of high-fructose corn syrup

Meanwhile, So there's an industrywide effort to overhaul supply chains to include better ingredients

Pepsi's recent acquisitions, such as Siete Foods, play into the push toward healthier snacks

Moreover, Pepsi-owned SunChips use multigrain

And PopCorners are baked instead of fried, in today's market environment

Furthermore, The company already has some brands that are aligned with the current administration's initiative

But its blockbuster snack brands are not

That's to change with the relaunch of Frito-Lay's Simply lineup, which removes artificial ingredients

Furthermore, Pepsi is relaunching Lay's and Tostitos under the Simply lineup in the fourth quarter or first quarter of next year and exploring the relaunch of Doritos, Cheetos, and Ruffles

Furthermore, The move showcases Pepsi's commitment to in its top brands and willingness to clean up its lineup to adhere to changes in consumer preferences and regulatory pressures

Pepsi is noticeably discounted from its historical valuation Pepsi can't control the cycle or trade policy, but it is taking steps to lower costs and make investments that should help the company in the long run

As mentioned, Pepsi's full-year guidance calls for flat earnings per (EPS) growth

On the other hand, 24 per, Pepsi would have a price-to-earnings ratio of 17

Additionally, Meanwhile, 6 if it hits its full-year goal

That's dirt cheap for what has historically been a premium-priced Dividend King

Furthermore, Over the last decade, Pepsi has a median P/E of 26. 2 -- so the stock tends to command a relatively expensive valuation

Meanwhile, To be fair, Pepsi isn't at the top of its game it was a few years ago, so it deserves to trade at a discount

But not as steep as what we are seeing in today's market

A passive income powerhouse to buy now Pepsi's second quarter was a reminder of the importance of investor sentiment and narratives in driving stock prices

Pepsi's results were mediocre at best, but the stock was so beaten down that OK was more than good enough, amid market uncertainty

A stock's price can get separated from fundamentals (to the upside and the downside) due to changes in sentiment, in this volatile climate

Additionally, With the dust settled, I'd argue that Pepsi is still undervalued given its portfolio of top brands across food and beverage

Some investors may prefer to wait to buy Pepsi until the company shows more convincing evidence of a return to growth

But in the meantime, the valuation is dirt cheap and the yield is high (an important development), in light of current trends

Value investors looking for passive income may want to scoop up s of the Dividend King and get paid to wait for the company to overcome its challenges

The Author Daniel Foelber is a contributing Stock Market Analyst at The Motley Fool, with extensive experience covering the broader stock market and publicly traded companies across energy, industrials, utilities, materials, nology, communications, consumer discretionary, consumer staples, and financials

On the other hand, Daniel looks for industry leaders offering compelling growth, value, or dividends to generate passive income

Daniel has written for various energy trade publications and assisted in building oil and gas training modules (quite telling)

At the same time, He graduated summa cum laude from the University of Houston with a BBA in Finance and Marketing and a certificate in Personal Financial Planning (this bears monitoring)

Daniel is a firm believer that the best investors aren’t the ones that pick the greatest stocks, but rather, are those who pick good stocks and are able to stay even-keeled throughout market cycles and periods of high volatility

It's because of this principle that Daniel believes that regular investors who out noise and focus on fundamentals can beat Wall Street

Additionally, TMFpalomino2 Daniel Foelber has positions in PepsiCo

Furthermore, The Motley Fool has no position in any of the stocks mentioned (this bears monitoring)

On the other hand, The Motley Fool has a disclosure policy.