Summary
- PepsiCo is rated a sell due to rising debt, weak free cash flow, and unsustainable dividend coverage.
- PEP’s recent gr…
Summary
- PepsiCo is rated a sell due to rising debt, weak free cash flow, and unsustainable dividend coverage.
- PEP’s recent growth stems from aggressive price hikes, masking persistent volume declines and deteriorating operating profits in core segments.
- Net debt has doubled over the past decade to $44 billion, while free cash flow has failed to cover dividend payouts for several quarters.
- Without substantial structural changes, PEP’s high valuation and financial leverage present significant downside risk despite (or maybe because of) its dividend king status.
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Intro
Since my last article about PepsiCo (PEP) (PEP:CA) in May 2025, where I have been negative on the stock due to ever-rising debt and weak dividend coverage, the stock has gone up
This article was written by
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**Analyst’s Disclosure:**I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Quick Insights
PEP’s sell rating is based on unsustainable dividend coverage, persistent volume declines, rising debt, and a high FCF multiple near 35x, outweighing short-term price gains.