Why I Love Pepsico.
Pepsico is a brands business despite its name and prime product, Pepsico unlike Coca Cola, has expanded its portfolio beyond drinks, and now have a considerable portion of their cash flow generated through their food and snacks brands.
Pepsico has a wide range of brands within its portfolio giving it access to much needed diversification, which is its key advantage over Coca Cola. In fact Pepsico's food and snacks portion of its brand portfolio now make up over %50 of its earnings. This allows it to compete with a much larger pool of competitors and offers much more room for growth.
The brands Pepsi owns are well pruned and advertised, allowing them each to fight for dominance in their respected markets. Who hasn't heard of Mountain dew or Lay's? This portfolio of well known brands is continuing to expand with its recent acquisition's of Rock-star Energy and BFY Brands. These new business allow Pepsico to enter the energy drink and healthy snacks market's respectively.
The healthy snack market particularly has great potential for growth due to the trends towards healthy living among younger generations. Building up healthy snack, food and drink brands positions Pepsico well for future growth and sustainability.
Pepsico has continued to pay and grow its dividend for 20 years, including through the financial crises as well as the covid pandemic. The company has shown itself to be incredibly resilient and defensive when it comes to payments to shareholders, and i expect this to continue into the future if they continue their current trends. The payout ratio is currently 79% of their earnings however i strongly believe this will be reduced greatly as cashflows continue to grow as well as its recovery from covid.
As of writing this Pepsico yields a dividend of 2.97% which is just above industry average and if Pepsico continues its trend we should see this increase year on year although of course nothing is guaranteed, i believe Pepsico is in a very strong position to do so.
Pepsico is a top tier foundational stock in my portfolio, i believe it is a fairly defensive company that adds a generous, ever expanding cashflow to my investments. Despite acting as a defensive pick for me, Pepsi is far from being a boring stock, as it acquires more brands and slowly shifts its portfolio into new directions i think we'll see greater returns in the form of not only dividends but also capital growth as it expands into healthier options in future.