PepsiCo, Kroger, and McDonald's: Undervalued Stocks Near 52-Week Lows
PepsiCo's stock has recovered some of its losses since the company reported second-quarter earnings, but it still trades near its $134 52-week low. Despite this weakness, the company's underlying performance is solid, with year-to-date organic revenue increasing 2.5% year over year and core constant-currency earnings rising 3%. PepsiCo owns an iconic brand portfolio, including Cheetos, Doritos, and Gatorade, backed by global distribution.
The combination of these factors helps produce steady sales and reliable cash flow to support ongoing dividend increases. The stock trades at a reasonable forward price-to-earnings (P/E) multiple of 17 and offers a strong dividend yield of 4%, which is supported by earnings. With analysts projecting earnings to grow at an annualized rate of 7% over the next few years, PepsiCo could be a rewarding dividend investment from these levels.
Kroger's shares have fallen 4% year to date and are trading near their 52-week low of $54. The company benefits from strong customer loyalty and convenient shopping habits, since most people tend to shop at the grocery store closest to home. With nearly 2,700 stores and $148 billion in trailing sales, Kroger has built a durable competitive edge.
Kroger's stock trades at just 11 times forward earnings and offers an above-average 2.3% dividend yield that's supported by earnings. With analysts expecting earnings to grow about 7% per year, the shares look like a genuine bargain that could pay off over the next five years.
McDonald's shares have fallen 11% year to date and are about 5% above the 52-week low of $261. Even so, the business continues to perform reasonably well, with global systemwide sales rising 6% year over year on a constant-currency basis in the first quarter.
McDonald's earns extremely high margins, with an adjusted operating margin of 46% last quarter. The company keeps costs low and cash flow steady due to nearly 95% of its restaurants being franchised. This attractive mix makes McDonald's a rewarding investment for dividend investors.