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1/13/2013

PepsiCo: A Big Dividend Payer For My Dividend Yield Passive Income Portfolio


Last Friday I put 20 PepsiCo shares into the Dividend Yield Passive Income Portfolio (DYPI). The total purchase amount was $1,422 which represents roughly 1.4 percent of the whole portfolio net worth.

PepsiCo is a global food and beverage company. It’s the second biggest soft drink producer and distributor in North-America (behind Coca Cola) and a Dividend Champion with 40 years of consecutive dividend growth.  Additionally, it owns a number of other businesses - ranging from fruit juices and other non carbonated drinks to bottled water and breakfast cereal. PepsiCo's most important division is its food products  division, which consists of Frito-Lay and Quaker Oats.

The DYPI-Portfolio was funded virtual with $100,000 on October 04, 2012. I like to show you with this experiment that you can make money with dividend stocks if you are a wise, disciplined and patient investor with a long-term investment horizon.

I have realized a double-digit return since I started investing money into stocks. I lost much money over years - that's part of the business. But I ever had stocks with a great total return that paid me off.

One of my trading accounts with the longest performance history shows that I made a six-figure gross income with stock trading over the recent decade. One third of my profits came from dividends and two third were capital gains.

Investing money into dividend stocks is no one-way strategy to trading success. It’s hard work and should give you fun. You should enjoy reading my blog and other stuff from the capital market. Educate yourself and create your own investment philosophy. Out there are so many investment opportunities to make money with.

I did it too and made big money. Today I live off dividend payments. My annualized dividend income is in a five-figure range.

Why did I put PepsiCo into the Dividend Yield Passive Income Portfolio?

Well my first thoughts were that I don’t have enough low beta stocks with a higher capitalization and a broader diversified business model. PepsiCo is not a cheap stock. The company has a current P/E ratio of 18.90 and the forward P/E is expected at 16.07. Earnings growth is weak for the time being. For the next year, earnings per share are expected to grow by 8.62 percent and for the next five years the growth is expected at 6.18 percent.

PepsiCo is a must have investment for a long-term dividend growth investor like me. I own the company personally despite the fact that the performance was very weak within the recent years. I hold roughly 2.79 percent of my full real net worth in the company. My biggest position is still Philip Morris with 6.87 percent portfolio share.

The PepsiCo stake will give me around $45 dividend income per year. The full portfolio dividend income is estimated at $800. I will put more stocks into the DYPI-Portfolio. As of now I own around 15 stocks and have still $78,926.55 in cash for further stock acquisitions.

At the end of the year 2013 the total number of shares in the portfolio should count 50 – 70. As a result, the yearly dividend income will grow to 3,000 – 4,000. For the upcoming 10 years, this amount should double. That's my aim!

What do you think about my thoughts? Is it possible? Is PepsiCo the right stock for the DYPI-Portfolio to achieve these goals? Please share your thoughts with me and leave a small comment below. I will reply you.

Here is the current portfolio:

Dividend Yield Passive Income Portfolio Overview (Click to enlarge)

These are the latest portfolio transactions:

Lastest Dividend Stock Buys Passive Income Portfolio (Click to enlarge)

Here is a snapshot of the 3 biggest companies including PepsiCo:

PepsiCo (NYSE:PEP) has a market capitalization of $109.64 billion. The company employs 297,000 people, generates revenue of $66.504 billion and has a net income of $6.462 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $12.242 billion. The EBITDA margin is 18.41 percent (the operating margin is 14.48 percent and the net profit margin 9.72 percent).

Financial Analysis: The total debt represents 36.73 percent of the company’s assets and the total debt in relation to the equity amounts to 130.04 percent. Due to the financial situation, a return on equity of 30.66 percent was realized. Twelve trailing months earnings per share reached a value of $3.75. Last fiscal year, the company paid $2.02 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.88, the P/S ratio is 1.65 and the P/B ratio is finally 5.35. The dividend yield amounts to 3.03 percent and the beta ratio has a value of 0.45.


”Long-Term
Long-Term Stock History Chart Of PepsiCo (PEP)
”Long-Term
Long-Term Dividends History of PepsiCo (PEP)
”Long-Term
Long-Term Dividend Yield History of PepsiCo (PEP)

Dr Pepper Snapple Group (NYSE:DPS) has a market capitalization of $9.38 billion. The company employs 19,000 people, generates revenue of $5.903 billion and has a net income of $605.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.231 billion. The EBITDA margin is 20.85 percent (the operating margin is 17.35 percent and the net profit margin 10.25 percent).

Financial Analysis: The total debt represents 29.17 percent of the company’s assets and the total debt in relation to the equity amounts to 119.66 percent. Due to the financial situation, a return on equity of 25.67 percent was realized. Twelve trailing months earnings per share reached a value of $2.92. Last fiscal year, the company paid $1.21 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.42, the P/S ratio is 1.59 and the P/B ratio is finally 4.23. The dividend yield amounts to 3.02 percent and the beta ratio has a value of 0.71.


”Long-Term
Long-Term Stock History Chart Of Dr Pepper Snapple Group (DPS)
”Long-Term
Long-Term Dividends History of Dr Pepper Snapple Group (DPS)
”Long-Term
Long-Term Dividend Yield History of Dr Pepper Snapple Group (DPS)

Coca-Cola (NYSE:KO) has a market capitalization of $165.55 billion. The company employs 146,200 people, generates revenue of $46.542 billion and has a net income of $8.634 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $12.596 billion. The EBITDA margin is 27.06 percent (the operating margin is 23.06 percent and the net profit margin 18.55 percent).

Financial Analysis: The total debt represents 35.72 percent of the company’s assets and the total debt in relation to the equity amounts to 90.31 percent. Due to the financial situation, a return on equity of 27.37 percent was realized. Twelve trailing months earnings per share reached a value of $1.92. Last fiscal year, the company paid $0.94 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.26, the P/S ratio is 3.56 and the P/B ratio is finally 5.28. The dividend yield amounts to 2.76 percent and the beta ratio has a value of 0.50.


”Long-Term
Long-Term Stock History Chart Of Coca-Cola (KO)
”Long-Term
Long-Term Dividends History of Coca-Cola (KO)
”Long-Term
Long-Term Dividend Yield History of Coca-Cola (KO)


5 comments:

  1. I think Pepsi is a great addition to your portfolio. Yes, the price is a little high right now, but with the fiscal cliff crisis averted (at least for the time being), Pepsi may not come down to a better entry point.

    ReplyDelete
  2. Hi Tom
    Pepsi is a excellent choice great company that will always be around. What I like most about what you said was the paragraph that started with investing money into dividend stocks in no one way strategy. And goes on about being hard work n should be fun. To read your blog n educate yourself and come up with Your Own Philosophy. Not to copy you or someone else.
    Thank You
    Ken 

    ReplyDelete
  3. Thank you so much for your comments. PEP is definitly high valueated but I always told you that high quality stocks have a high price.

    ReplyDelete
  4. Pepsi and Coke are mainstays for any long term dividend growth investment portfolio. I suggest them to people that are looking to construct starter dividend portfolios. Easily understandable business, patent protected product, long history of dividend payments and good cashflow. The addition to your model portfolio is spot on. I think sometimes we get a little too fixated on price. I am happy to buy at close to fair value. With a holding period of 20+ years, your initial value shouldn't be too much of a concern if its close to fair value. Of course, getting a bargain is always better!

    Integrator

    ReplyDelete
  5. With the rising strength of the American Dollar, Pepsi will take a hit when it tries to bring all of those foriegn profits back into the US. The stock is overpriced here with a big run over the last 18 months. It is poised for a pullback to it's 200 day moving avg. I think you can find a cheaper entry point later.

    ReplyDelete

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