Is your portfolio thirsty for an undervalued dividend payer? There are plenty of solid options to choose from at this time, but arguably none as compelling as PepsiCo (PEP 0.95%) in the wake of the stock's 22% pullback from its 2023 high.

Shares of the beverage giant are near multiyear lows right now. But there are three very specific reasons a turnaround appears to be in the cards.

1. Complete control of its entire business

You know the brand name. But you may not know the company quite as well as you think.

PepsiCo is, of course, parent to popular soda Pepsi and all of its offshoots. The organization also owns complementary brands like Mountain Dew, 7-Up, Bubly water, and even Gatorade.

Then there's the side of PepsiCo you may not realize is part of this company. Although they only make up a minority of its sales, snack food brand Frito-Lay's (Frito's, Cheeto's, Lay's and Ruffles potato chips, Rold Gold pretzels) and even Quaker Oats are also part of the PepsiCo family, and account for a slight majority of its operating income.

That's not the bullish part of the bullish thesis here though. Indeed, while Frito-Lay is clearly a dominant name within the snack food market, PepsiCo is still playing second fiddle to rival Coca-Cola (KO 0.48%) on the beverage front.

Rather, the crux of the bullish argument here is the distinct way that PepsiCo's drinks business is different than Coke's. Whereas The Coca-Cola Company has punted the bulk of bottling and distribution work to third-party bottlers so it can focus on what it does best (marketing), PepsiCo is taking a different tack. Instead of getting out of the bottling aspect of the business, it's making a point of owning as many of its own bottling facilities as it can here and abroad. It's even doing some bottling work for competing products like Dr Pepper. The company also owns most of its food manufacturing facilities.

Image source: Getty Images.

So what? On the surface it seems like more of a liability than a benefit. Manufacturing facilities are expensive to operate, after all. Coca-Cola has seemingly absolved itself of this risk and headache by offloading this lower-margin work to its partners. And to this end, PepsiCo's operating margin of around 10% is less than half that of its beverage archrival (and that's despite very wide margins for its snack foods business).

There's a proverbial price to be paid for the use of third-party manufacturing partners, though. That's a loss of control of the process, and in particular, the timing of production. Coke's bottlers are still ultimately in business for themselves, whereas PepsiCo's bottling and food production is entirely controlled by the company to perfectly and immediately suit its needs.

And this may matter more than you think for reasons well beyond convenience.

2. Better net gains than you-know-who

PepsiCo may trail The Coca-Cola Company in terms of share of the beverage business, as well as operate at a lower profit margin rate. There is one arguable and measurable upside to PepsiCo's approach, however. That is, it ultimately allows for more net growth, and more net gains to investors.

That's what the data says anyway. If you made two identically sized investments in both companies 30 years ago and then reinvested any dividends paid by either stock in the meantime, your current position in PepsiCo would be significantly bigger than your Coca-Cola holding.

PEP Total Return Price data by YCharts

PepsiCo's faster dividend growth explains at least part of this disparity. But, it's also arguable that Coca-Cola's sheer size, age, and, now, complexity all ultimately contribute to slower and more expensive growth. Also know that PepsiCo's stock-buyback efforts have more often than not been more generous than Coke's, meaning its stock builds value at a faster pace than Coca-Cola's.

3. A strong dividend yield (and dividend pedigree)

Finally, PepsiCo's a top bet right now for the simple reason that its stock's recent weakness has pumped up its forward-looking dividend yield to around 3.6%. That's not just better than Coca-Cola's projected yield of 2.9%. It's better than most consumer goods stocks of companies of a comparable size, age, and caliber.

Moreover, you'd be hard-pressed to find an enterprise with a better track record of dividend growth than PepsiCo. Although Coca-Cola technically tops it with 63 consecutive years of annual dividend increases, with 53 years of yearly payout increases of its own, PepsiCo is certainly no slouch.

It's also worth mentioning that PepsiCo's payout ratio of about three-fourths of its profits not only leaves the company with some fiscal flexibility, but is also in line with the norm for the beverage business.

More reward than risk

None of this is to suggest PepsiCo is completely bulletproof. It faces challenges, too. For example, it's going to soon be shuttering a Frito-Lay facility in New York to achieve some much-needed cost-cutting. Its stock also tumbled on Wednesday on concerns that the federal government may soon be cutting funding for food assistance programs, potentially undermining its reliance on such programs. PepsiCo's profit forecast for the entirety of 2025 posted in early February also fell short of analysts' expectations, rekindling this ticker's weakness since mid-2023.

As is so often the case though, the sellers have arguably overshot their target just because they're not seeing the bigger bullish picture.

This might help: Despite a handful of recent red flags from the company in addition to the stock's weakness, the analyst community remains optimistic. The current consensus price target of $162.50 is 7% better than the stock's recent price, but that's huge for a stock of this ilk -- particularly given how easy it's been to beat up on it of late. Any turn for the better should prompt these underlying target prices higher again, fanning the bullish flames.