3 Numbers That Explain Why I'm Buying PepsiCo With My Next $5,000

You can always find a stock to buy. The best investments, however, are often selected well in advance of their actual purchase, identified based on their potential and their fit within a particular portfolio. You may just be holding out for a pullback, or perhaps you're not willing to sell one position to fund the purchase of another, and are instead waiting until you've saved up enough cash to buy in.

If I'm being honest, the latter scenario is one that frequently applies to me. I tend to remain 100% invested at all times, and am rarely interested in letting go of anything just to free up some cash. It may have taken me weeks (if not longer) to pick and purchase a particular holding, after all. I'm not simply going to unwind that effort.

To this end, although I'm not in it yet, once I've got my next few thousand dollars saved up in my retirement account, I'm almost certain I'll be stepping into a new position in beverage and snack name PepsiCo (NASDAQ: PEP) -- for three reasons.

Not much happens these days without an actionable plan and process

The older you are, the more likely you are to agree that not much personal progress happens in life without a specific, actionable, pre-made plan. We're all just too busy and distracted. It's even true within the money and investing arena -- if we don't make a point of taking the time to tuck some money away or identifying a specific investment we'd like to make, it may never happen.

We can respond to this reality in a range of ways, including being disciplined enough to divert cash to a brokerage account or an IRA as that cash becomes available. In a similar sense, we can simply be disciplined enough to make a point of logging into an account and finding a new name to buy when we know there's enough money ready to be put to work.

Let's be realistic, though. As was noted, there's just too much going on in life to reliably do that. We all need to find simple systems that work for us.

One of the most powerful approaches I've found is automating cash deposits into investment accounts. I automatically divert some of my paycheck to my brokerage account, most of which -- although not all -- automatically gets transferred to a retirement account. Although there was some initial setup required on my end several years ago, this is now a hands-off process that I very likely wouldn't do if I had to do it manually every month. Your bank and/or broker can help you automate these deposits.

Image source: Getty Images.

As for finding new stocks to buy, as part of my twice-monthly bill-paying process, I regularly log into my brokerage account as well, just to check in. This is when I update my surprisingly small watch list of stocks to consider buying, with any additions usually being names I recently came across and thought were interesting enough to remember. Just know that some of my new stock picks sit on my watch list for months before I actually make a purchase.

That's it. That's my process, which I'm pretty convinced has done me more good -- by forcing disciplined action -- than I would have mustered with a more "just go with the flow" approach. And, needless to say, this process has kept PepsiCo at the top of my watch list for a while now.

Three reasons I'm picking PepsiCo

Don't misread the message. Rival Coca-Cola remains one of the market's top dividend-paying prospects as well. If you own it, you're hardly doomed, and if you want to buy Coca-Cola stock instead, you'll be fine. For me, though, there are three numbers about PepsiCo that I just can't ignore:

4.7% (and 54)

I don't personally want or need dividend income right now. But I do want steady, reliable income being generated within my tax-sheltered retirement account to facilitate the purchase of other investments, including growth investments. To this end, PepsiCo stock's forward-looking dividend yield of 4.7% is about as good as you're going to get from a blue chip stock of this risk and ilk right now. It's also about twice Coca-Cola's current yield.

Based on its history, I'm also comfortable with this dividend payment's future. Not only has PepsiCo paid a quarterly dividend like clockwork for decades now, but it has raised its per-share payment every year for the past 54 years, with no end to the streak in sight.

35% (and $149.50)

It's not too difficult to understand why investors have been so leery of owning PepsiCo shares of late. Lingering inflation had been taking a toll on its top and bottom lines.

The sellers, however, have arguably overshot their target. This stock's still down 35% from its 2023 peak when inflationary headwinds first began blowing, despite glimmers of hope for a turnaround starting to shimmer in the meantime. In this vein, analysts' current consensus price target of $149.50 is nearly 20% above the ticker's present price, which isn't a bad way to start out a new trade given what's expected to be ahead.

2% to 4% (and 4% to 6%)

So what is ahead? At least partially thanks to a rather sweeping reset of its product portfolio -- like the addition of a prebiotic cola or the introduction of dye-free Doritos -- we're likely to start seeing respectable fiscal progress again. The company expects to report top-line growth of between 2% and 4% this year, resulting in per-share profit growth of between 4% and 6%.

Those aren't huge numbers by marketwide standards. But those are certainly respectable numbers for a name in the slow-moving consumer goods industry. These growth rates are also expected to persist for at least the next couple of years, slowly restoring investors' confidence in the stock as that progress is made.

Perhaps more important right now, however, given these numbers, it's unlikely I'll change my mind before I get to my $5,000 target to invest in what will be a (very) long-term position. My stock-picking and purchasing process is too proven to not adhere to now.

James Brumley has positions in Coca-Cola. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.