Last week PepsiCo (PEP) declared a quarterly dividend of $1.15 a share, up about 7% from $1.075 a share. That brings the dividend yield up to 2.7%, almost exactly Coca-Cola’s (KO) 2.72% yield.
On the basis of that yield and the pricing power that the company demonstrated in first quarter earnings I’m adding the stock to my Dividend Portfolio. I think it’s a good pick for a period of high inflation and uncertain economic growth.
In the first quarter organic revenue grew by 14% year over year. That was a significant gain for the 2% growth in the first quarter of 2021. Most of that increase in organic revenue can from a 10% price increase by the company in the quarter (added t low-single-digit growth in
volumes.) The price increase didn’t dent sales even in markets that have, historically, been price sensitive. The company saw 11% volume growth in Africa, the Middle East, and South Asia (6% of sales) and 6% volume growth in Latin America (9% of sales).
The stock certainly isn’t cheap but PepsiCo’s edge in this high inflation/low growth environment justifies paying a slight premium for the shares in my opinion. The stock trades at a trailing 12-month price-to-earnings ratio of 27.26 and Morningstar calculates that the shares trade at an 11% premium to fair value. PepsiCo shares are down 0.54 for 2022 as of the close on May 9.
The stock is also a member my JubakPIcks and 50 Stocks Portfolios.