Who should consider owning PepsiCo (NASDAQ:PEP) stock? The answer is: a wide variety of investors.
Maybe you like to collect passive income, or perhaps you want to get defensive as a recession might be approaching in 2023. If you’re looking for lightning-fast price action, this probably isn’t for you, but many cautious-minded investors can think about buying PepsiCo shares.
Many people are concerned about high inflation, interest rate hikes and the possibility of a recession coming. Amid this worrisome backdrop, it’s natural to seek shelter in cash. However, there are stocks that offer a good value and have fared comparatively well during recessions.
In other words, you don’t have to hide out in an all-cash position. PepsiCo’s longtime investors understand that great businesses and their shareholders can withstand tough economic conditions, and come out the other side intact.
| PEP | PepsiCo | $183.34 |
PEP Stock Is Low-Volatility, and That’s Comforting
When you’re looking for a crisis hedge in the world of stocks, check for a low beta. That’s a measure of a stock’s volatility compared to the stock market in general.
PEP stock has a five-year monthly beta of 0.59, so it moves slower than the S&P 500, which has a beta of 1. That’s why this stock gets a “B” instead of an “A” rating; if you own too many PepsiCo shares, your portfolio will probably underperform the overall stock market.
On the other hand, it should be fine to hold a few shares of PepsiCo. They’ve held up well during previous recessions, compared to more volatile, high-beta stocks. Plus, you can collect dividends while you wait for a recession to pass.
Speaking of that, PepsiCo offers a forward annual dividend yield of 2.55%, which should appeal to passive income investors. Furthermore, PepsiCo has a trailing 12-month price-to-earnings (P/E) ratio of 25.8x. So, the shares aren’t overpriced and that’s important during an economic downturn.
It’s Not Bad that PepsiCo Is Trimming Its Staff
Some folks might be worried about PepsiCo if they read that the company is laying off some of its workers. This doesn’t necessarily mean PepsiCo is in trouble, though.
The Wall Street Journal broke the story that PepsiCo is reportedly “laying off workers at the headquarters of its North American snacks and beverages divisions.” Thus, this isn’t a massive headcount reduction throughout the entire company.
It’s really just a sign that PepsiCo is serious about reducing its financial outlays. As a memo from PepsiCo explains, the layoffs are intended “to simplify the organization so we can operate more efficiently.”
That’s not great news for the workers being laid off, of course. Still, it shows that PepsiCo is responsive to changing economic conditions. So, prospective investors should continue to monitor the headlines to see if PepsiCo implements further cost-cutting measures.
What You Can Do Now
No financial asset is completely safe, but PEP stock has a history of weathering economic storms. Moreover, PepsiCo pays a dividend that should whet the appetite of passive income investors.
Hence, a wide variety of people can benefit from a small stake in PepsiCo shares. Just don’t expect the same excitement – or the same risks – that you might get from higher-beta stocks.
On the date of publication, Louis Navellier had a long position in PEP. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.