PepsiCo. (NYSE: PEP) ($66.07, 3/16/10) on March 15, 2010, announced its 38th consecutive dividend increase and the repurchase of up to $15.0 billion of common stock through June 30, 2013 (see Pepsi site here). PepsiCo has an addition $6.4 billion available from a 2007 authorization for the repurchase of common stock by June 2010.
This past year, we (www.element-alpha.com) rated PepsiCo as a Four Star stock, which means it had been selected by our model at least four times during the last ten years, but did not make the cut for any of the current year’s portfolios. Additionally, to get a Four Star rating the company’s fundamentals must not exhibit any red flags.
During the past 20 years, PepsiCo made it into our portfolios five times; the average holding period was 1.4 years, and the average annual return was 16.81% (dividends reinvested). However, if we had bought PepsiCo in March 1989 and held it for 20 years, the annual return would have been 11.71% (not a bad return by itself).
Compared to the S&P 500 TR Index (total return dividends reinvested), which had an annual return of 8.32% for the same 20-year period, PepsiCo is a big winner. In our opinion, the odds are that PepsiCo’s returns will be greater than the 9.5% over the next ten years, which means that it may be returning to our portfolios someday soon.