If you are interested in cashing in on PepsiCo Inc’s (NASDAQ:PEP) upcoming dividend of $0.93 per share, you only have 6 days left to buy the shares before its ex-dividend date, 31 May 2018, in time for dividends payable on the 29 June 2018. Should you diversify into PepsiCo and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. Check out our latest analysis for PepsiCo
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does PepsiCo fare?
PepsiCo has a trailing twelve-month payout ratio of 93.93%, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect PEP’s payout to fall into a more sustainable range of 62.31% of its earnings, which leads to a dividend yield of 3.85%. Moreover, EPS should increase to $5.77, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. PEP has increased its DPS from $1.7 to $3.71 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PEP a true dividend rockstar. Compared to its peers, PepsiCo has a yield of 3.69%, which is high for Beverage stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, PepsiCo ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PEP’s future growth? Take a look at our free research report of analyst consensus for PEP’s outlook.
- Valuation: What is PEP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PEP is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.