Soft drinks are an all-time favorite among people of all ages. PepsiCo (NYSE:PEP), being the leader in the beverage industry, is constantly innovating new products and techniques for its valued customers. Over the years, this company has also provided a decent return to its valued investors. It is a global beverage and food company with brands that stand for quality, and are respected household names — Pepsi-Cola, Lay's, Quaker Oats, Tropicana and Gatorade, to name a few. It has a portfolio of enjoyable and wholesome foods and beverages.
People are now much more health conscious as the rate of obesity is accelerating at a great pace. Sugar, being the most important ingredient of soft drinks, is the main contributor to obesity. Health consciousness of people has paved the way to a decline in the consumption of carbonated soft drinks and diet soda in the U.S. market. The only reason for this is numerous health problems such as weight gain, poor dental health, diabetes and cardiovascular disease.
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- PEP 15-Year Financial Data
- The intrinsic value of PEP
- Peter Lynch Chart of PEP
Tracking Performance of the Company
Currently 61% of PepsiCo revenues come from Quaker, Frito-Lay and other food brands. The additional 39% comes from Pepsi, Gatorade, Tropicana and others. One of the main benefits of an investment in Pepsi is that it's a rock-solid dividend stock, even if it doesn't garner the same notability as other high-flying growth stocks. Yet that means it's also likely to crash and burn, and over the long term, the compounding effect of its quarterly payouts, as well as its growth, adds up faster than most investors imagine.
One of the main benefits of an investment in Pepsi is that it's a rock-solid dividend stock, even if it doesn't garner the same notability as other high-flying growth stocks. Yet that means it's also likely to crash and burn, and over the long term, the compounding effect of its quarterly payouts, as well as its growth, adds up faster than most investors imagine.
With a current payout ratio of 50%, and EPS set to grow at 7.95% over the next five years according to analysts' estimates, there is plenty of room for this company to grow. Pepsi was able to grow its revenue at a compounded annual growth rate of 8.65% over the last five years, from $43.2 billion in 2008, to $65.5 billion in 2012. Pepsi was able to grow its dividend at a CAGR of 9.45% over the last 10 years, even through the ups and downs of the economy.
Tapping the Indian Market
PepsiCo plans to invest more than $5.5 billion in India. The food and beverage company is one of the largest in India and India also represents one of PepsiCo's largest global markets. The company has 38 bottling plants and three food plants in India, according to its website. It hopes to widen the offerings of food and beverages to cater to Indian consumers' "evolving needs," and noted that it has eight brands in the country that generate more than $160 million in annual revenue. PepsiCo will also increase its infrastructure in India in an effort to increase its selling and delivery capabilities, with a particular focus on rural markets. The company intends to provide resources to its farming program which caters to 24,000 farmers things like seed, expertise, insurance and loans. In order to cut costs by $3 billion through 2014, PepsiCo is also undergoing a strategic initiative.
In addition to India, Pepsi is also expanding in other emerging countries like China, Brazil and Africa through tailored distribution models as well as by offering locally relevant innovation and value-added products. Pepsi is growing its business in developing markets like Russia, Mexico, Canada and the UK.
From "Fun-Filled" to "Good-Filled" Products
The company released two new Mountain Dew Kickstart flavors on Jan. 13: black cherry and limeade. These products emphasized low sugar content. With consumers going the healthy way, PEP decided to transform its portfolio from "fun-filled" to "good-filled" products. The transformation has worked well for business and many of the healthier products are giving good margins.
Pepsi has started to introduce a new line of healthy food options in China, where reports of chronic illnesses have been increasing. As consumers become more health conscious, Pepsi and some of its competitors in the global packaged food market are introducing foods that include traditional Chinese folk medicine ingredients like wolfberry plants, chrysanthemum teas and tremella.
With net revenues of more than $65 billion and a product portfolio that includes 22 brands that generate more than $1 billion each in annual retail sales, PepsiCo is committed to sustainable growth by investing in a healthier future for the investors. PepsiCo is providing stable returns to its shareholders over the years. The company is expected to keep up the momentum this year too. It is expecting to grow its earnings per share by 7% this year. This indicates that the company will keep its history of consistently increasing dividends. With the recent details of its financials, PepsiCo is expected to quench the thirst of its consumers in the future.