PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company is a member of the S&P Dividend Aristocrat index, after raising distributions for 38 years in a row. Most recentlyPepsiCo raised its quarterly dividend payment by 7% to $0.48/share. Dividend author Dave Van Knapp has included the company in his most recent book "The Top 40 Dividend Stocks for 2010".
The stock has returned a 7.60% average annual return over the past decade, fueled by the company’s strong growth in earnings.
Analysts are expecting EPS growth to $4.17 in FY 2010, which would be a 10.60% increase in comparison to FY2009 EPS of $3.77. The expectations for FY 2011 are for EPS to reach $4.65, which would be an 11.50% increase.
Earnings growth could also come from strategic acquisitions, as well as product innovations in health and wellness food and beverage section.
The return on equity has remained largely above 30%, with the exception of 2004, when it fell to as low as 22%.
A 13.60% growth in dividends translates into the dividend payment doubling almost every five years. Since 1979 PepsiCo has actually managed to double its dividend payment every six years on average.
The dividend payout has remained below 50%, with the exception of a brief increase in 2008. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Full Disclosure: Long PEP