Assessing PepsiCo Inc's Upcoming Dividend and Historical Performance
PepsiCo Inc (PEP, Financial) recently announced a dividend of $1.27 per share, payable on 2024-01-05, with the ex-dividend date set for 2023-11-30. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into PepsiCo Inc's dividend performance and assess its sustainability.
What Does PepsiCo Inc Do?
PepsiCo is a global leader in snacks and beverages, owning well-known household brands including Pepsi, Mountain Dew, Gatorade, Lay's, Cheetos, and Doritos, among others. The company dominates the global savory snacks market and also ranks as the second-largest beverage provider in the world (behind Coca-Cola) with diversified exposure to carbonated soft drinks, or CSD, as well as water, sports, and energy offerings. Convenience foods account for approximately 55% of its total revenue, with beverages making up the rest. Pepsi owns the bulk of its manufacturing and distribution capacity in the United States and overseas. International markets make up 40% of total sales and one third of operating profits.
A Glimpse at PepsiCo Inc's Dividend History
PepsiCo Inc has maintained a consistent dividend payment record since 1973. Dividends are currently distributed on a quarterly basis. PepsiCo Inc has increased its dividend each year since 1973. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 50 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down PepsiCo Inc's Dividend Yield and Growth
As of today, PepsiCo Inc currently has a 12-month trailing dividend yield of 2.85% and a 12-month forward dividend yield of 2.92%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, PepsiCo Inc's annual dividend growth rate was 6.10%. Extended to a five-year horizon, this rate increased to 6.90% per year. And over the past decade, PepsiCo Inc's annual dividends per share growth rate stands at 8.10%.
Based on PepsiCo Inc's dividend yield and five-year growth rate, the 5-year yield on cost of PepsiCo Inc stock as of today is approximately 3.98%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, PepsiCo Inc's dividend payout ratio is 0.81, which may suggest that the company's dividend may not be sustainable.
PepsiCo Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks PepsiCo Inc's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. PepsiCo Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and PepsiCo Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. PepsiCo Inc's revenue has increased by approximately 9.30% per year on average, a rate that outperforms approximately 70.1% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, PepsiCo Inc's earnings increased by approximately 7.10% per year on average, a rate that outperforms approximately 50% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 4.70%, which outperforms approximately 44.12% of global competitors.
Concluding Thoughts on PepsiCo Inc's Dividend Sustainability
With a rich history of dividend payments and consistent growth, PepsiCo Inc stands as a testament to a robust dividend policy. However, the payout ratio may raise concerns about the long-term sustainability of such dividends. Coupled with the company's strong profitability and growth metrics, the outlook for PepsiCo Inc's dividend appears promising but warrants close monitoring by investors. As we consider the balance between yield, growth, and financial health, PepsiCo Inc's track record suggests a commitment to rewarding shareholders through dividends. Will this trend continue in line with the company's historical performance? Only time will tell, but the indicators point towards a positive trajectory for value investors.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
