Submitted: October 11, 2010
Often perceived as the poor cousin of the Coca-Cola Company (KO
), PepsiCo (PEP
) often finds itself being overlooked by dividend-seeking investors.
The company owns a number of key brands, which will are well represented across the globe. These include Pepsi, Quaker Foods, Doritos and Lipton.
There is little to split between the two giants. PepsiCo (PEP
) trades on a price to earnings multiple of around 16 times earnings and a dividend yield of 2.8%, while Coca-Cola (KO
) trades on 17 and 2.9%.
However PepsiCo (PEP
) is expanding its focus into the health foods market with an investment in a new Global Nutrition Group which will be based in Chicago and for investors who see this as a growth market, they might be tempted to consider the stock for their portfolios.
Presenting third quarter earnings recently PepsiCo (PEP
) Chairman and CEO Indra Nooyi told investors that the company expected to grow revenue from its nutrition businesses from about $10bn to $30bn by 2020. The market potential is significant, and the stable of brands (Quaker, Tropicana, Lebedyansky, Sabra, Alvalle) are impressive. Couple this with strong distribution and innovation, as well as partnerships with the scientific community, including with universities and research institutions around the world, the company is firmly on the right path to deliver authentically nutritious products around the world.
Third quarter earnings at PepsiCo (PEP
) were solid. Net revenue was up 40% while net income was up 12%. Cash flow from operations for the year was $5.8bn billion, up 31 percent and management re-affirmed that it expected to deliver earnings growth of between 11 and 13% for the quarter. Management used these strong cash-flows to repurchase $1.1bn in stock or 17 million shares (around $64 per share on average).
Investors forget that PepsiCo (PEP
) is no longer a poor cousin. The company offers the world's largest portfolio of billion-dollar food and beverage brands and this is coupled with nearly $8bn in operating cash flow each year.
These characteristics, plus a bold move into the health foods make it a company for serious consideration for dividend-seeking investors.