Key Points
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PepsiCo is one of the world’s largest consumer staples companies.
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Hormel is a protein-focused food icon.
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PepsiCo and Hormel are deeply unloved on Wall Street even though they have incredible dividend track records.
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Shares of PepsiCo (NASDAQ: PEP) are down 25% from their five-year high. That’s bad, but it’s even worse for Hormel (NYSE: HRL), which is down over 50% from its five-year high. Both companies are facing headwinds, but if history is any guide, they’re worth buying and holding for the long term, given their historically high yields: 4.1% for PepsiCo and 5.1% for Hormel. Here’s why.
There are problems, but they aren’t unusual
PepsiCo and Hormel are unloved right now because they are both dealing with real headwinds. At the industry level, inflation is running high, putting pressure on profit margins while also causing consumers to tighten their budgets. Meanwhile, consumer buying habits are shifting toward healthier fare, which means food makers must invest to adjust their portfolios.
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These are real problems and shouldn’t be ignored. However, they are fairly normal problems in the consumer staples sector. Hormel and PepsiCo both have histories that go back more than 100 years. They have survived through periods like this before, and it is highly likely they will do so again.
That’s underscored by the fact that both companies are Dividend Kings. That means they have increased their dividends annually for 50+ years. That isn’t something that happens by accident; it requires a strong business model that gets executed well in both good times and bad. Now is just a bad time, but that’s an opportunity if you like high-yield stocks.
PepsiCo is a diverse industry leader
PepsiCo will probably be the better choice for more conservative income investors. It operates globally, with businesses in the beverage, snack, and packaged-food spaces. It is the number one player in salty snacks and number two in beverages. The company has brand power, distribution might, marketing skills, and innovation chops that stand toe-to-toe with any consumer staples company.
In fact, despite current headwinds, the company’s organic sales increased by 1.3% in the third quarter of 2026. Unfortunately, that was far below key competitor Coca-Cola (NYSE: KO), which saw organic sales grow 7% in the quarter. That has investors downbeat, but PepsiCo is still finding ways to grow. And eventually, the business is likely to pick up again. If you buy it today, you can collect that lofty yield while you wait.
Hormel has an insider on your side
Owning Hormel will take a bit more emotional resilience. While the yield is attractive, the company’s organic sales fell 2% in the third quarter. That comes after a year or so of growth, suggesting that the company’s turnaround efforts have hit a rough patch. But the Dividend King’s food business is highly focused on protein, which puts it in a hot food trend. It also has a large business in the food service space, which has been performing quite well. In other words, there are both positives and negatives here.
That said, there’s a unique twist that could make the stock a long-term buy. The Hormel Foundation owns roughly 47% of Hormel’s stock. The foundation uses the dividends it collects to further its philanthropic efforts, so it wants to see a reliable and slowly growing dividend over time. That’s basically what most dividend investors are likely to want as well, so you have an insider on your side. And a key purpose of the trust is to ensure that Hormel remains a stand-alone business, which means it has the leeway to make long-term investment decisions (regardless of Wall Street’s typical near-term focus).
Take hold of these dividends for a decade or more
The S&P 500 index (SNPINDEX: ^GSPC) yields roughly 1%. The average consumer staples stock yields 2%. If you think in decades, even when Wall Street is thinking in days, buying high-yield Dividend Kings like PepsiCo and Hormel while they are out of favor can materially amp up your passive income stream. In fact, if you buy now, you may not want to sell when the businesses and stocks start to perk up again. Why give up such large yields from historically reliable dividend stocks when you have the opportunity to cash in on the dividends for decades to come?
Should you buy stock in Hormel Foods right now?
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Reuben Gregg Brewer has positions in Hormel Foods and PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
