PepsiCo (PEP) is an iconic American multinational company with its headquarters in Purchase, New York. The company was formed in 1965 with the merger of the Pepsi-Cola Company and the chip/snack manufacturer Frito-Lay. The current PepsiCo has grown its portfolio of brands dramatically in recent years to include popular brands such as Tropicana, Quaker-Oats, Lipton-Teas, and Gatorade. Over the last 15 years not counting dividends PepsiCo stock has risen 74.7%, easily beating the S&P500 gains of 47%, and crushing key competitor Coca-Cola's (KO) shares, which have only risen 4.5%.
Earnings/Growth Outlook
PepsiCo is currently valued at 106B, and trades at 16.9x earnings; compared with a 19x earnings multiple on Coke-Cola shares. PepsiCo is a dividend aristocrat. Currently trading at $68.04 the shares yield 3.16% and have raised distributions to share holders every year since 1987. PepsiCo reported a strong Q1 earnings, showing sales growth in dozens of their multi-billion dollar brands globally. Honestly earnings growth has disappointed investors in recent years, and the shares look to earn only marginally more money in 2013 than they did in 2011. But at a 20% discount to Coca-Cola shares, a higher dividend, and a stronger international portfolio of snack brands PepsiCo has the ability to coin profits, and increase earnings dramatically. From 2009 to 2010 alone earnings per share grew from $3.71 to $4.13, an increase of +10%.
A Look at the PepsiCo Brand Portfolio
Data from 2009, 19 brands worth +1B in sales.
(click to enlarge)
Conclusion
PepsiCo makes a great addition to any portfolio; the non-cyclical nature combined with strong cash flow provides the investor security and a sizeable/growing dividend. As globalization grows to full force over the next decade the world will come to know, love, and buy many PepsiCo products. Iconic in nature, and international in reach, PepsiCo brands look poised to grow and return value to share holders for years to come. If you believe in the brands above, PepsiCo shares are for you.
Buy on dips, Always do your homework, Also see PepsiCo SEC filings
Disclosure: I am long PEP.
