PepsiCo: A Stable Play for Income and Growth

10/28/2019 5:00 am EST


Bob Ciura

Contributing Editor, Sure Dividend

PepsiCo (PEP) has been one of the best-performing dividend growth stocks over the past several decades; the company has increased its dividend for 47 consecutive years, notes Bob Ciura, contributing editor to Sure Dividend.

PepsiCo is a global food and beverage company that generates $67 billion in annual sales. The company’s major brands include Pepsi, Mountain Dew, Frito-Lay, Gatorade, Tropicana, Quaker, and many more.

While known for its carbonated beverages, Pepsi’s food and snacks make up approximately 52% of sales. PepsiCo has a current market capitalization of $192 billion.

With a 3% dividend, PepsiCo is not the highest-yielding stock around, but on the other hand it offers investors a great deal of stability. PepsiCo has a long history of paying and raising its dividend each year, even during recessions.

It has a strong business model and a large collection of some of the world’s most valuable brands. Therefore, the company can be expected to continue paying its dividend each year for the foreseeable future, even if the U.S. enters a recession.

The company has multiple catalysts for future growth, including new products and continued expansion into the emerging markets.

Sports and athletic drinks are an emerging area of focus for PepsiCo. In addition to its flagship Gatorade brand. The company’s line of “Better for You” offerings are designed to meet consumers’ desire for healthier food and drink options.

An annual return of around 10% per year, backed by strong fundamentals and a solid dividend yield, is highly attractive for risk-averse dividend growth investors.

PepsiCo may not have the most exciting business model. But PepsiCo has a sustainable dividend, regardless of the state of the economy. And, it has multiple catalysts for future growth, meaning it should continue to raise its dividend each year.

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