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Pepsico (PEP) announced a 5.88% increase in the company's third quarter dividend to 45 cents per share. This compares to a quarterly dividend of 42.5 cents per share in the same quarter last year. The rate of dividend increase for the company is declining from the 5-year historical dividend growth rate of 14%.
- The projected payout ratio based on the new dividend is 44% based on 2010 estimated earnings per share of $4.02.
- The 5-year average payout ratio is approximately 41%.
- PEP carries a S&P Earnings and Dividend Quality Ranking of A+.
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I missed the announcement. I offer the following thought.
Most investors seem to be chasing financials. I have a feeling that PEP which wasnt hurt by the recession will outperform most financials from here.
In early March the strongest financials were a great buy and not being greedy I have now sold them. PEP on the other hand is still near its bottom and has room to grow.
At 49 from a high near 80 and a historic 10% growth rate PEP seems like a bargain. It goes against the traders playbook to invest in a stock like PEP coming out of a recession. My guess is PEP at 62 by end of the year.