My Top Dividend Growth Stock to Buy in September and Hold Forever

PepsiCo raised its quarterly dividend 4% to $1.48 per share in May 2026, extending its annual dividend-growth streak to 54 years and producing a 4.3% yield at recent prices. While the stock is down 14.3% over six months versus gains of at least 13% for Coca-Cola, Keurig Dr Pepper, and Monster Beverage, the article frames its relative underperformance and lower sector valuation as a buying opportunity. Over 10 years, PepsiCo shares gained 29%, while dividend reinvestment lifted total return to 75%.

Analysis

The dividend increase is unlikely to change PEP’s marginal buyer base; income-oriented ownership is already well established, and a high yield can become a valuation trap if it is funded through a rising payout ratio rather than durable free-cash-flow growth. The investable question is whether the discount reflects temporary execution issues or a structural reset in North American snacks and beverages. PEP has more exposure than KO, KDP, or MNST to packaged-food volume and input-cost dynamics, creating greater upside to a recovery in volumes and productivity—but also greater downside if consumers continue trading down or reducing discretionary snacking.

The near-term catalyst path is earnings-driven, not dividend-driven: evidence of improving volume/mix, stabilization in promotional intensity, and protection of gross margin would support a 1-3 month rerating. A second-order beneficiary of PEP’s need to defend shelf space could be large retailers such as WMT and COST, which gain negotiating leverage and may see more promotional funding; private-label food suppliers are also the less-discussed competitive threat. Over 6-18 months, GLP-1-driven changes in snacking behavior remain a meaningful asymmetrical risk because PEP’s food portfolio has more exposure to consumption occasions that could be pressured than beverage-focused peers.

Consensus may be treating the relative underperformance as a simple value opportunity, while overlooking that peer outperformance partly reflects cleaner category positioning and less operational complexity. The contrarian bullish case requires only modest volume stabilization because PEP’s depressed expectations leave room for a multiple recovery; the bearish case is that sustained negative volume turns cost savings into an offset rather than a source of earnings growth. The thesis is falsified by another guidance reduction, continued volume deterioration across Frito-Lay North America, or dividend growth materially exceeding free-cash-flow growth.

Key Decisions for Investors

• Watch, rather than immediately add, PEP ahead of the next earnings release; initiate a 3-6 month long only if organic volume trends improve sequentially and management reaffirms full-year margin and cash-flow targets. Target a rerating versus staples peers; exit on a further guidance cut or evidence that promotional spending is accelerating without volume response.
• For a market-neutral expression, consider long PEP / short KO in equal dollar amounts only after confirmed PEP volume stabilization. PEP offers greater recovery torque from operating improvement, while KO is the cleaner defensive hedge; risk is that packaged-food demand remains structurally weaker than beverage demand, in which case maintain a tight stop on widening relative underperformance.
• Do not underwrite the yield as a substitute for earnings growth. Set an alert for payout-ratio expansion, weakening free cash flow, or debt-funded shareholder returns; any of these would convert the income narrative from support to a multiple-compression risk.
• Monitor MNST and KDP as read-throughs on beverage category elasticity and promotional intensity. Continued relative strength in those names alongside weak PEP beverage trends would indicate a company-specific share issue rather than a broad consumer slowdown and argues against the PEP recovery trade.