This Dividend King That Yields More Than 4 Times the S&P 500 Is a Buy This Month. Here's Why.

Do you need a stock with a strong dividend yield but also one that offers dividend growth you can count on? Names that check off both boxes aren't exactly abundant; you often only get one or the other.

There's one of these relatively rare stocks worth stepping into this month. Having rightly earned the title of Dividend King, it has a track record of 54 consecutive years of annual dividend growth and an incredible forward-looking yield of 4.2% that's four times bigger than the S&P 500's current yield.

That name is beverage behemoth PepsiCo (NASDAQ: PEP).

Chipping away at a turnaround

Drinks like Gatorade, Pure Leaf tea, Ocean Spray juices, and its namesake cola are of course its biggest business (although not overwhelmingly so), but the company's not just packaged beverages anymore. PepsiCo is also parent to snack chips outfit Frito-Lay -- which includes Lay's, Dorito's, Cheetos, and more -- as well as Quaker Oats.

But business hasn't been particularly great of late. Last year's organic revenue growth was a modest 1.7% mostly due to lingering inflation that forced consumers to rethink much of their discretionary spending. Lowering its retail prices largely addressed the problem but at the expense of profits. That's why the stock's now down 28% from its mid-2023 peak after hitting a new 52-week low just last month.

Image source: Getty Images.

Now look more closely. While the work's certainly not done, this consumer goods company is successfully responding to this demand headwind in several ways. One of them is the creation of more relevant and marketable snacking options. For instance, in February, PepsiCo unveiled Dorito's chips with added protein. Earlier this year, the company introduced fiber-infused SunChips, and last year, it acquired prebiotic soda brand Poppi.

These new offerings haven't exactly sparked a sweeping turnaround, although there's more than a glimmer of hope that one is brewing. Last quarter's total revenue improved to the tune of 6.4% year over year largely thanks to acquisitions, while 2.4% organic sales growth indicates that extensions of existing brands are also finally getting some traction.

PepsiCo is also looking for similar growth rates in the latter half of this year, including per-share profit growth of between 4% and 6% that will help fund $7.9 billion worth of total dividend payouts versus last year's $7.6 billion. And again, that's in support of a dividend that's now been upped for 54 years in a row and a dividend behind an unusually high forward-looking yield of 4.2%.

Close enough to the bottom for long-term investors

It's admittedly not easy to step into a poorly performing stock. It feels like you're attempting to catch a falling knife in mid-air.

Just keep the bigger picture in mind here. The consumer goods business is obviously sensitive to economic conditions, and consumers themselves are fickle when it comes to personal preference. Both backdrops are highly cyclical though, and PepsiCo itself is adapting to the current norm. Even if the stock's ultimate long-term bottom isn't yet in, we're arguably closer to it than not.

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