PepsiCo Adds Some Fizz with SodaStream

09/17/2018 5:00 am EST

Focus: CONSUMER

Charles Carlson

Editor, DRIP Investor

PepsiCo (PEP) is broadening its reach in the beverage business with the planned acquisition of SodaStream International, the maker of the popular seltzer machines, explains dividend reinvestment expert Chuck Carlson, editor of DRIP Investor.

The move is in line with the company’s efforts to reduce its reliance on soft drinks and move toward “healthier” and more environmentally friendly products.

The move also gives PepsiCo a presence in the “in-home beverage creation” market. SodaStream makes countertop machines that allow consumers to carbonate tap water at home.

The Israel-based company has made nice strides in certain countries, such as Germany and Japan. PepsiCo was also in the news with the announcement that its long-time CEO, Indra Nooyi, will be stepping down in October.

Her replacement will be PepsiCo’s global operations chief Ramon Laguarta. Laguarta was reportedly instrumental in securing the SodaStream deal. PepsiCo is paying $3.2 billion for SodaStream, a fairly hefty price. However, the move reflects both the need and the difficulty in generating growth in the beverage market.

PepsiCo’s Frito-Lay snack-food division continues to drive most of the company’s growth. PepsiCo stock has come off its 52-week high of more than $122 per share. Consumer-staples stocks have lagged this year, as investors have been more focused on technology and go-go growth stocks.

However, more recent trading has seen some shifting back toward defensive stocks. PepsiCo’s yield of 3.3%, its dividend growth, and relative stability are all positives, especially if market conditions worsen.

Please note PepsiCo offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company.

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