Dividend Expert Checks Up on Dr Pepper

Focus: Consumer

Vita Nelson Image Vita Nelson Founding Publisher and Editor, Moneypaper

Dr Pepper Snapple Group (DPS), based in Plano, Texas, is an owner, manufacturer and distributor of non-alcoholic beverages in the United States, Canada and Mexico, notes Vita Nelson, dividend reinvestment expert and editor of DirectInvesting.

Its brands include Dr Pepper, Canada Dry, Crush, Schweppes, Sunkist soda, 7UP, A&W, Sun Drop, RC Cola, Squirt, Diet Rite, Vernors and the concentrate form of Hawaiian Punch.

It is considered a solid, diversified business with wide economic moat and sustainable competitive advantage as well as a solid corporate culture.

Dr Pepper Snapple has paid dividends to investors since 2009 and has increased its payments for 7 consecutive years. During those past 5 years, it has increased its dividends at an average rate of 10.8%, and its quarterly payment of $0.58 currently provides a yield of 2.34%.   

A hypothetical investment in DPS has grown cumulatively (including dividends reinvested) 303.23% since it became a stand-alone, publicly traded company in May 2008.

The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 48%, which means the company is paying out only 48% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business.

Its Price to Earnings ratio (a measure of valuation) of 20.6 is 28% below its industry average, its Price to Book ratio of 7.8 is 7% below its industry average and its Price to Sales ratio of 2.7 is 16% below its industry average.

Technically (from the chart’s perspective) DPS looks attractive, trading 6.9% below its all-time high, while it is forming a price consolidation pattern between $99 and $81 approximately, in which $81 is acting as a technical support level.

With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who have a long-term investment horizon.

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