Thursday, February 11, 2016

Watch List: PepsiCo


It may feel like I’m posting a little too much lately… so let’s keep that trend going! Today I’d like to review a company that we all know and I think most of us love. That’s right ladies and gentlemen. I’m talking about PepsiCo. Let’s dig in!


PEP is a worldwide producer of delicious soft drinks and various snack foods. The most notable that can be recognized are Pepsi, Mountain Dew (KickStart is my life blood), and Gatorade. As for their snack foods, the most recognizable are Lays, Ruffles, and of course the finger dirtying but savory Doritos. The company was originally formed out of Purchase, New York in 1898 which makes it one of the oldest companies still in production today. The brand names are catchy, their snacks are delicious, and the company is on the dividend aristocrat’s list.

Historical information

PepsiCo has been around for a long time. Given the fact that the company has not turned over yet and that it continues to be a household name in products, it should be no surprise that the company comes from a long history of making money and spending it well. Since 2012, PEP has had a positive income sheet. They were up from the income in 2012 to 2013 but they did feel a slight dip in 2014. That dip however was hardly noticeable as they still took in quite a great deal of money. Their cash flow on the other hand continued to rise steadily from 2012-2014. This I feel is much more important than their ultimate income. Big businesses all seem to have ups and downs but it’s all about how the company manages the cash they have for the year when it comes to evaluating whether you should trust them with your partial ownership of their company. Now let’s move the discussion over to their dividends. PEP has been increasing their dividend yearly for the last 43 years and over the last three years, they’ve averaged 8.9% dividend growth. This brings their current payout ratio to 61.6% even after 43 years of increases.

PepsiCo as it stands now

PEP has remained largely unchanged. The company remains a huge player in the global market and it is consistently eyed by many a dividend growth investor. Their dividend payout is an annual $2.81 and their yield is 2.86%. This is all still reflecting their 61.6% payout ratio. Their current price is $97.78/share which is thankfully down from its 52week running high of $103.44/share. Their P/E is 29.01 and their EPS is 3.37. This would suggest that the stock right now is pretty overpriced and to anyone who has been watching the market lately, this isn’t a surprise. It seems that a great deal of the more lucrative companies are incredibly inflated at this given time. Regardless, we must not lose sight of the company itself. The company continues to be demanded by the market as loyal Pepsi fans cry for more and it appears that the heads of the company will continue to be more than ready to give into their demands.

To watch or not to watch

Overall, PepsiCo is an extremely amazing performer. Their company runs very efficiently and their price shows a very nice upward trend that no doubt will continue. Although their stock right now seems quite overpriced given the P/E of 29.01, this stock is one that needs to make its way into the Cookie Jar portfolio as soon as possible. I’ll definitely be adding this stock to the buy list and watching and praying for the market to bring its price down so I can grab quite a few all at once for a more reasonable price.


  1. PEP is on my watch list as well. It is a fantastic compounder of wealth. The current valuation is a bit too high for my liking but as the market moves down, I'm sure I will be rewarded for being patient and get the right price.

    1. I can't wait until I can get my hands on PEP. Between PEP and JNJ, whichever gets to my target floor first, I'll grab one of em before the other but eventually both (if all goes according to plan).