PepsiCo, with the ticker PEP and an increase of 1.24%, is considered a staple among blue-chip stocks. The company, a longstanding titan in the beverage and snacks industry, holds the status of a Dividend King. This classification is reserved for a select group of S&P 500 index stocks that have increased their dividend payouts annually for at least 50 years.
PepsiCo is often seen as a prime example of an income stock, largely due to the significance of its dividend payouts. The company currently distributes a quarterly dividend of just under $1.36 per share. When annualized, this totals $5.42 per share, resulting in a dividend yield of nearly 3.2% based on a recent closing price. This yield is notably higher than the average yield of S&P 500 index stocks, which is just under 1.3%.
The need for a substantial yield is apparent given PepsiCo’s modest fundamental growth, distinguishing it from typical growth stocks. In its latest third-quarter earnings report, PepsiCo disclosed a slight year-over-year decrease in net revenue, amounting to $23.3 billion. Simultaneously, its core (non-GAAP or adjusted) net income saw a marginal increase to $2.31 per share from the previous year’s $2.25. Although revenue fell short of analysts’ consensus expectations, profitability slightly exceeded forecasts. Additionally, PepsiCo adjusted its full-year 2024 earnings guidance upward by $0.01 per share, projecting earnings of $8.15.
Overall, the quarter was uneventful, which aligns with the expectation that investors do not typically seek excitement when purchasing PepsiCo shares. Instead, they are attracted by its steadily rising dividend, which offers a superior yield compared to the average. While not positioned as a dynamic growth stock, PepsiCo effectively maintains robust cash flows and consistent profitability, making it a strong candidate for investment, particularly for those seeking income stocks to enhance their portfolios.
