key points
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Dividend Kings are stocks that have increased their dividends annually for 50 years and can be indicators of strong stock market performers.
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Pepsi is a food giant that is getting cheaper due to fears over weight loss drugs.
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Lowe’s stock looks cheap at the bottom of the housing cycle.
In a bull market, the best move a contrarian investor can make is to buy with good pay dividend stock Who are out of the investment limelight. Wall Street has its eyes set on artificial intelligence (AI) and space stocks, while everything else has been tossed to the side. This creates opportunities for those willing to go against the grain.
enter PepsiCo (NASDAQ: PEP) And lowe’s (NYSE: LOW). both are stock dividend king – meaning they’ve increased their dividends for 50 years – and trade at a discount to the market today. That’s why both will make solid passive income plays for your portfolio in 2026.
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A sign that says there is a profit on it.
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Increase in food expenses
The food and beverage sector is under threat due to the rapid growth of weight loss drugs, which suppress food cravings. PepsiCo – owner of Pepsi, Frito-Lay and other food/beverage brands – has suffered the brunt of this adversity after years of consistent global growth driven by volume and price growth.
Revenue growth stalled shortly after weight loss drugs became popular a few years ago, leaving Pepsi in a bad state. However, the company has begun to pivot its business strategy with some success by improving nutritional quality, reducing portion sizes to align with weight loss medications, and focusing on premiumization as a way to treat snacking or soda consumption as a deliberate decision rather than a daily habit.
Last quarter, which ended in March, PepsiCo reported 8.5% net revenue growth and 2.6% organic revenue growth, as well as a operating margin It increased to 16.5% compared to 14.4% a year ago.
Years of huge profits are over for soda and snack brands around the world. However, Pepsi can maintain its revenue growth through steady price increases, which could be a major profit driver for the sector in the long term. If a bag of chips goes from $1 to $2 to $4 in 30 years, consumers won’t blink when they see the lower price.
This is why Pepsi has been able to increase its dividend for 54 consecutive years. Buying today at its 3.6% yield, this stock could become a passive income base for your portfolio even over the next 50 years.
Waiting for a Housing Recovery
Perhaps the area facing even more adversity than food and drink is housing. The decline is due to the increase in existing home sales in the United States mortgage rates And they are now at levels last seen at the bottom of the housing crisis in 2009 and 2010.
One company heavily influenced by housing activity is Lowe’s, one of the two largest home improvement supply companies in the United States. Home Depot.
Overall, Lowe’s revenue is down more than 10% from its peak, which shows how stagnant the current housing market is. Comparable-store sales growth bottomed out in 2023 and has since begun to improve, most recently turning positive over the past three quarters. This shows that Lowe’s is growing revenue from existing locations despite significant headwinds in housing construction.
When someone buys a home, they are more likely to renovate parts of it, which connects Lowe to the overall housing market as these DIY projects dry up. Yet, eventually, the housing market will return to normal, either through lower mortgage interest rates or higher annual wages that will make home purchasing more affordable for the average American. In turn, this should create a strong tailwind for demand for Lowe’s in the coming years.
Lowe’s has been a mighty dividend king and currently pays dividend yield 1.95%. It has a lower starting yield than Pepsi, but management focuses more on stock repurchases than dividends, with shares outstanding falling 37% over the past 10 years. This is a good capital return combination that will help Lowe’s stock produce growing passive income for your portfolio as you wait for the housing turnaround to lift the share price higher.
Should you buy stock in PepsiCo now?
Consider this before buying stock in PepsiCo:
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Brett Schaefer No positions in any of the stocks mentioned. The Motley Fool has posts on Home Depot and recommends it. The Motley Fool recommends Lowe’s Companies. The Motley Fool has one Disclosure Policy.