The market’s wild swings in the past few weeks reflect some economic uncertainty. Rising interest rates are starting to take their toll on the economy. More importantly for investors, rising bond yields tend to compete with dividend-paying stocks in the short-term.
That can create some opportunities for investors. Especially if they focus on industry leaders that have proven that they can still grow amid the current uncertainty, and can continue to grow their dividends.
PepsiCo (PEP) beat expectations in its most recent earnings report. The beverage and snack producer helped offset fears that new appetite suppression drugs were weighing on snack sales.
Pepsi shares are flat over the past year, following a recent selloff. But the stock now trades for less than 20 times forward earnings. That’s the cheapest valuation for Pepsi in years.
Action to take: Long-term investors may want to buy shares here, and look to add during any bear market in the future. Pepsi is an industry leader in the snack space, and plays a strong second place in the beverage market.
Plus, thanks to the recent drop in shares, today’s buyers can get a 3 percent starting dividend. Pepsi has a long track record of growing its dividends over time.
For traders, the January 2024 $180 calls, last going for about $1.20, could see high double-digit returns in the coming months, especially if the market gets a year-end rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.