This article was originally published on Kiplinger – https://www.kiplinger.com/
Market value: $155.9 billion
Dividend yield: 2.9%
PepsiCo (PEP, $108.00) is a global food and beverage company whose well-known brands include the namesake Pepsi-Cola, as well as Frito-Lay, Gatorade, Quaker and Tropicana.
After a few years of declines in the top line, PepsiCo is back to growing revenues, and in fact, analysts expect sales to improve by low single digits for the next couple of years. Also, PepsiCo is a strong cash-flow generator, and it puts that cash flow to good use – once in a while in acquisitions such as 2016’s deal for KeVita, but also via raising its dividend and repurchasing shares.
For the uninitiated: Share repurchases are a powerful catalyst for share appreciation because they take shares off the market and help juice the earnings-per-share number. In its fourth-quarter earnings report in February, PepsiCo announced a new $15 billion stock repurchase program spanning from July 1, 2018, through June 30, 2021, that will replace an expiring $12 billion program dating back to July 1, 2015.
PepsiCo also announced another increase to its dividend – the 46th consecutive such increase, which means it too is a Dividend Aristocrat.
Right now, analysts at Bank of America/Merrill Lynch believe shares’ current valuation fails to reflect management’s efforts to accelerate growth in PepsiCo’s core beverage business. Translation: There’s more room for upside in shares.