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PepsiCo: An Excellent Opportunity For Dividend Investors

Mar. 09, 2020 1:35 PM ETPepsiCo, Inc. (PEP)10 Comments


  • As global markets are tanking due to the coronavirus, I am once again looking for interesting dividend stocks.
  • Pepsico is offering a solid and rising dividend yield, increasing buybacks and a satisfying balance sheet on top of solid organic sales growth.
  • I hope to buy as soon as the stock is down 10% and will add on further weakness.

This is the first time I am covering the Purchase NY based consumer staples giant Pepsico (NASDAQ:PEP) on this website. The reason I am writing this article is the current stock market environment. Global stocks are heavily impacted by the ongoing coronavirus and its implications on established supply chains. This once again warrants the search for excellent stocks that are trading at a discount. Pepsico is one of these stocks. The company has an excellent business track record, a long history of increasing shareholder value, a stable balance sheet. And above all: with global yields in a free fall, there is an increasing need to buy yield.

Image result for pepsico logo

Source: Pepsico

What's Pepsico?

Normally, this is the part where I explain what a company does for people who are new to a certain company. However, as Pepsico is the world's second-largest producer of beverages with a market cap of $191 billion and more than 265,000 employees, I am keeping the descriptive part a bit small and focus on the pros that make this company a good company a bit more.

Let's start by mentioning some of the 'basics'. First of all, Pepsico's products include its flagship beverage Pepsi and well-known brands like Tropicana, Gatorade, Mountain Dew, 7Up, and Lipton. The company also owns brands like Quaker, Sodastream, Lay's Chips, Cheetos and Brisk. To give you a few numbers, 54% of the company's sales are generated in its snacks segment. In this segment, the company has the world's largest market share. Beverages, which account for 46% of sales provide the company with the second biggest market share - right behind its biggest competitor Coca-Cola (KO). To date, 58% of sales are generated in the US. 71% of sales are generated in developed markets. The remaining 29% come from emerging markets with Mexico being the biggest market in that

This article was written by

Leo Nelissen profile picture

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I'm a buy-side financial markets analyst specializing in dividend opportunities, with a keen focus on major economic developments related to supply chains, infrastructure, and commodities. My articles provide insightful analysis and actionable investment ideas, with a particular emphasis on dividend growth opportunities. I aim to keep you informed of the latest macroeconomic trends and significant market developments through engaging content. Feel free to reach out to me via DMs or find me on Twitter (@Growth_Value_) for more insights.

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PEP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (10)

Ko and pep are still a bit high. Maybe for a reason?? Sealed beverages, whether water or soda... Appealing ... considering Corona virus. Corona... Speaking of beer... Many of the Brewers are available at better multiples. In colonial days, beer and rum were the beverages of choice on ships (think cruise), even for children, because they do not harbor disease.
AlphaElephant profile picture
No. Too expensive. 25x trailing for maybe 6-7% EPS growth and 2.9% yield?  

No thanks, way better div growth offers out there now: MO, PM, CSCO, ABBV, etc

I love the company, agree it’s quality and have a small position, but I wouldn’t add for more that 17x EPS. Just call it under $100, I’d be interested.
Jamjack profile picture
I want to add, but it still is not that low. I'm waiting. Fabulous company and products.
McLOVIN It profile picture
I agree. Its not low enough to buy in yet.
This company offers great value as it is quite immune to cyclical slowdowns and the 3 percent dividend is safe.
Bim Ska La Bim profile picture
Hard to think of better places to invest for the stable (with some nice div growth) side of one's port.
Saw some blabbering about Pepsi being overvalued somewhere else. Pepsi with a 2.87% yield and growing dividend will remain attractive until the 10 year decides down is not the only way to go. How I see it, you can't go wrong with Pepsi if you want yield and a company that's just going to keep growing steadily for the foreseeable future.
Leo Nelissen profile picture
Exactly. The company is not overvalued. The company would be if the 10Y were yielding 2%.
KO and PEP are holds right now. Too early to buy and too late to sell. Just collect dividends and wait for recovery to former highs.
Huge crash today. I don't think it's stopping any time soon. I'll be interested once it reaches 10% above its 52wk low.
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