There are two great reason to buy a blue-chip dividend stock that declines in value. The first is that if its business is strong, it'll likely rebound and net you a gain. The second is that when a dividend stock falls in value, that means its yield increases.
If it costs you less to buy a share of a company but you are still earning the same quarterly dividend payment, you are earning more per dollar on your investment.
PepsiCo, Inc. (NASDAQ:PEP) stock has fallen more than 10% this year. What's surprising is that it's down even though the company is coming off a good fourth-quarter performance where it beat analyst expectations for both revenue and earnings.
Sales of $22.5 billion in Q4 were up 8.8% year over year and its net income of $1.8 billion grew by 4.5%.
The company is benefitting from people staying at home amid the pandemic, trends that could continue for the foreseeable future.
Today, the stock pays a yield of 3.1%. And one of the biggest benefits of investing in PepsiCo is the company's impressive track record of increasing payouts, a streak that's now closing in on 50 years.
Shares of Pepsi are currently trading at a price-to-earnings multiple of under 26 which is cheap compared to the average stock on the S&P 500 which investors are paying more than 28 times earnings for.
With many popular brands in its portfolio and the business proving to be resilient even during such difficult times, PepsiCo Is proving to be a safe stock that you can hang on to for the long term.
