Up to date on April twenty sixth, 2024 by Bob Ciura
We imagine the Dividend Aristocrats are the “cream of the crop” of the U.S. inventory market. The Dividend Aristocrats are a gaggle of S&P 500 shares which have elevated their dividends for not less than 25 years, amongst different necessities.
With this in thoughts, we created an inventory of all 68 Dividend Aristocrats, together with essential monetary metrics equivalent to dividend yields and price-to-earnings ratios.
You’ll be able to obtain your free listing of all 68 Dividend Aristocrats by clicking on the hyperlink under:
Disclaimer: Certain Dividend is just not affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official info.
We overview all of the Dividend Aristocrats every year. Subsequent up, we’ll overview the meals and beverage large PepsiCo (PEP).
The inventory gives a stable 2.9% dividend yield and has elevated its dividend for over 50 years in a row. The corporate’s dividend could be very secure, and the inventory is appropriate for risk-averse earnings buyers.
PepsiCo’s valuation is just not precisely a cut price proper now, however it’s hardly ever an inexpensive inventory as a result of its glorious enterprise mannequin and regular progress. The corporate ought to have little hassle persevering with to boost its dividend for a few years.
Enterprise Overview
Pepsi-Cola was created within the late Nineties by Caleb Bradham, a North Carolina pharmacist. In the meantime, Frito-Lay, Inc. was fashioned in 1961 from the merger of Frito Firm and the H. W. Lay Firm. In its present kind, PepsiCo got here collectively because of the 1965 merger of Pepsi-Cola and Frito-Lay.
At the moment, PepsiCo is a world meals and beverage large. It has a market capitalization above $240 billion and generates roughly $80 billion of annual income.
Its enterprise is break up roughly 60-40 when it comes to meals and beverage income. It’s also balanced geographically between the U.S. and the remainder of the world.
Supply: Investor Presentation
PepsiCo has a big portfolio and owns many well-liked manufacturers. A few of the firm’s main manufacturers embrace Pepsi and Mountain Dew sodas and non-sparkling drinks like Pure Leaf, Tropicana, Gatorade, and bottled water.
Along with PepsiCo’s core beverage manufacturers, it additionally has a big snacks enterprise underneath the Frito-Lay model. The corporate has additionally constructed a portfolio of more healthy meals, together with Quaker, Bare, and Sabra.
On April twenty third, 2024, PepsiCo reported first-quarter outcomes for the interval ending March thirty first, 2024. For the quarter, income elevated 2.2% to $18.25 billion, which topped estimates by $140 million. Adjusted earnings-per-share of $1.61 in contrast favorably to $1.50 within the prior 12 months and was $0.09 higher than anticipated. Foreign money change lowered income by 0.5%.
Natural gross sales had been up 2.7% for the primary quarter, beating consensus estimates of two.3%. Beverage quantity was flat whereas and handy meals quantity declined 0.5%. PepsiCo Drinks North America’s income grew 1% organically as increased costs greater than offset a 5% lower in quantity. Frito-Lay North America grew 2% at the same time as quantity declined 2%.
PepsiCo offered an up to date outlook for 2024 as nicely, with the corporate now anticipating adjusted earnings-per-share progress of not less than 8% for the 12 months, up from 7% beforehand. Natural gross sales are nonetheless projected to be up not less than 4%.
Development Prospects
PepsiCo has a protracted historical past of regular progress. Even in a difficult atmosphere as a result of declining soda consumption, PepsiCo has continued its constant progress.
We imagine PepsiCo will generate 6% adjusted earnings-per-share progress per 12 months over the subsequent 5 years. Going ahead, two of PepsiCo’s most promising catalysts are progress in more healthy meals and drinks and rising markets.
Massive soda corporations like PepsiCo have needed to adapt to a extra health-conscious client. To do that, PepsiCo has shifted its portfolio towards more healthy meals which might be resonating extra strongly with altering client preferences.
As well as, PepsiCo has an enormous progress alternative in rising markets like China, Africa, India, and Latin America.
Supply: Investor Presentation
These are under-developed areas of the world with giant client populations and excessive financial progress charges.
Worldwide markets (an significantly rising markets) had been a progress driver as soon as once more in 2023, and within the 2024 first quarter.
Final quarter, income in Europe had been up 10%, aided largely by a 7% improve beverage quantity and a 2% enchancment in meals quantity.
Income in Latin America elevated 8%, Africa/Center East/South Asia was up 7%, and the Asia Pacific/Australia/New Zealand/China area grew 11%.
Aggressive Benefits & Recession Efficiency
PepsiCo has quite a few aggressive benefits. Amongst them are sturdy manufacturers and a world scale. In all, PepsiCo has ~20 particular person manufacturers that every acquire not less than $1 billion in annual income. Sturdy manufacturers give PepsiCo optimum shelf house at retailers, and provides the corporate pricing energy.
PepsiCo’s monetary power additionally permits the corporate to put money into analysis and improvement and promoting to retain its aggressive benefits.
For instance, PepsiCo invests billions every year in analysis and improvement to innovate new merchandise and packaging designs. As well as, PepsiCo repeatedly spends greater than $2 billion every year on promoting to keep up market share and construct model fairness with customers.
PepsiCo’s aggressive benefits and powerful manufacturers make the corporate extremely worthwhile, even throughout recessions. Meals and drinks at all times retain a sure stage of demand, which is why the corporate held up so nicely in the course of the Nice Recession.
PepsiCo’s earnings-per-share all through the Nice Recession of 2007-2009 are listed under:
- 2007 earnings-per-share of $3.34
- 2008 earnings-per-share of $3.21 (3.9% decline)
- 2009 earnings-per-share of $3.77 (17% improve)
- 2010 earnings-per-share of $3.91 (3.7% improve)
As you may see, PepsiCo’s earnings-per-share declined solely modestly in 2008. The corporate proceeded to develop earnings by almost 20% in 2009, which could be very spectacular. Earnings continued to develop as soon as the recession ended.
The corporate reported sturdy progress in 2020 and 2021 when the coronavirus pandemic despatched the U.S. economic system right into a recession. Subsequently, PepsiCo is a recession-resistant enterprise.
Valuation & Anticipated Returns
PepsiCo is anticipated to generate earnings-per-share of $8.23 for 2024. Primarily based on this, the inventory trades for a price-to-earnings ratio of 21.4. Our truthful worth estimate is a price-to-earnings ratio of 21.0. Subsequently, PEP inventory seems barely overvalued. A declining price-to-earnings ratio may cut back annual returns by 0.4% every year over the subsequent 5 years.
Consequently, future returns will doubtless be comprised of earnings-per-share progress and dividends. We count on PepsiCo to develop earnings-per-share every year by 6%. As well as, PepsiCo additionally has a 2.9% present dividend yield.
Nonetheless, the overvaluation weighs on the inventory’s anticipated returns. The mix of valuation adjustments, earnings progress, and dividends ends in whole anticipated returns of 8.5% per 12 months over the subsequent 5 years.
PepsiCo has a safe dividend, with a projected dividend payout ratio of about 66% for 2024. This provides PepsiCo sufficient room to proceed rising the dividend at a price in-line with the expansion price of its adjusted EPS.
Few different corporations within the client staples sector can match its dividend progress historical past. PepsiCo just lately achieved Dividend King standing in February 2022. As such, we proceed to price shares as a maintain.
Ultimate Ideas
PepsiCo is a really sturdy enterprise with quite a few category-leading manufacturers. Investing closely in new merchandise and acquisitions will doubtless proceed rising gross sales and earnings for a few years.
Shareholders ought to proceed to profit from PepsiCo’s sturdy enterprise by annual dividend will increase. The inventory is overvalued, which suggests worth buyers ought to look ahead to a extra engaging entry level earlier than shopping for shares.
That stated, PepsiCo stays a useful holding for a dividend progress portfolio.
Moreover, the next Certain Dividend databases include essentially the most dependable dividend growers in our funding universe:
If you happen to’re on the lookout for shares with distinctive dividend traits, take into account the next Certain Dividend databases:
The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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