DoritosFernando Morales/The Globe and Mail
Hi I'm John Heinzl of Investor Clinic.
We've been talking about U.S. consumer stocks that raise their dividends. So far we've covered McDonald's, Procter and Gamble and Johnson & Johnson, and today I want to talk about PepsiCo.
Pepsi is the world's largest snack food company, and the second-biggest soft drink company. If you're a fan of Doritos, Quaker Oats, Gatorade or Mountain Dew, then you helped Pepsi generate sales of more than $43-billion (U.S.) and a profit of nearly $6-billion last year.
Now, let's take a look at Pepsi's dividend growth. Pepsi has raised its dividend for 38 consecutive years, including a 7 per cent increase last March. As you can see from this chart, the annualized dividend has more than tripled over the past 10 years.
Now, I'm not saying Pepsi will keep up this blistering pace of dividend growth, but investors can pretty much count on steady single-digit increases. Pepsi also returns cash to shareholders by buying back billions of dollars of its own stock.
What I also like about Pepsi is that it's a play on the global economy and emerging markets. The company has also done a good job of rolling out healthier products, things like waters, juices and oatmeal.
With a dividend yield of about 3 per cent and a forward price-to-earnings multiple of 14, the shares aren't especially cheap, but they're not outrageously expensive either.
As long as people keep drinking and snacking, you've got to think Pepsi will keep growing, and returning more cash to shareholders.
For Investor Clinic, I'm John Heinzl
John Heinzl