Dividend Aristocrat Overview: Pepsico, Inc.

Photo: Freeimages.com/Louis J. S.

About Pepsico, Inc.

Pepsico, Inc. is a diversified global food and beverage company.  The company currently has 22 separate “billion-dollar” brands.  Mountain Dew, Doritos, Tostitos, and Brisk Iced Tea, along with 18 other brands gross $1 billion in revenues per year.

Pepsico was formed in 1965 through the merger of Pepsi-Cola and Frito-Lay.  At the time of the merger, the company’s major brands were Pepsi, Diet Pepsi, Mountain Dew, Fritos corn chips, Lay’s and Ruffles potato chips, Cheetos, and Rold Gold pretzels.

Over the next 50 years, Pepsico acquired a variety of companies and introduces several brands.  In the 1970s and 1980s, Pepsico acquired Taco Bell, Pizza Hut and Kentucky Fried Chicken (now KFC), and later spun off this group of restaurants as Tricon Global Restaurants, Inc in 1995.  The company also acquired or purchased controlling stakes in several snack food makers worldwide, including Walkers Crisps and Smith Crisps (United Kingdom) in 1989, Gamesa (Mexico) in 1990, Cracker Jack (U.S.) in 1997, and Bluebird Foods (New Zealand) and Stacy’s Pita Chip Company (U.S.) in 2006.  Pepsico purchased different beverage brands over the years: Mug Root Beer (1986), Tropicana (1998), SoBe drinks (2000), and IZZE Beverage Company in 2006.  Pepsico also introduced the Aquafina brand of water in 1997 and Sierra Mist soft drinks in 2003.  In 2001, Pepsico merged with The Quaker Oats Company.

The company is a member of the S&P 500 index and a Fortune 50 company, and trades under the ticker symbol PEP. 

Pepsico’s Dividend and Stock Split History

Pepsi Dividend Growth

Pepsi has compounded dividends at nearly 10% since 2006.

Pepsi began paying out occasional dividends in 1936 and has paid regular quarterly dividends since 1955. Since 1973, Pepsi has increased its regular quarterly dividends and in 1998 met the Dividend Aristocrat criteria of 25 consecutive years of dividend increases. 2017 will be Pepsi’s 45th consecutive year of dividend growth.

Pepsi traditionally increases their quarterly dividend in the 2nd quarter of the calendar year. In February 2016, Pepsi announced an increase in their dividend of 7.1% to an annualized rate of $2.96. The next dividend increase is expected to be announced in February 2017 and to become effective in June 2017.

Pepsi’s dividend growth alternates between 5 – 10 year periods of double-digit percentage growth and 5 – 7 year periods of more moderate increases. Pepsi grew its dividend by more than 10% annually from 1973 – 1982, 1988 – 1997 and 2004 – 2008, while the annual dividend growth during other periods, including most recently from 2009 – 2013, has been roughly 5% per year. From 2011 – 2016, Pepsi compounded its dividend an average of 7.89%. Longer-term dividend growth rates are better, with compounded dividend growth rates of 9.82% over the last 10 years, 9.94% over the last 20 years, and 10.76% over the last 25 years.

Since beginning the streak of consecutive dividend increases in 1973, Pepsi has split its stock 4 times, with 3 for 1 stock splits in June 1977, June 1986, and September 1990 and a 2 for 1 stock split in May 1996. A single share, which collected $1.00 in dividends in 1972, would now be 54 shares, which collected $159.84 in dividends in 2013.

Pepsico’s Direct Purchase and Dividend Reinvestment Plans

Pepsi has both direct purchase and dividend reinvestment plans.  Investors interested in participating in either of these plans can find information at Computershare’s Investment Plan site.  The minimum initial investment amount for new investors is $500 and $50 for recurring investments through direct debit.  The minimum for additional investments is $50.

The plans have both purchase and sales fees.  There is a $10 initial setup fee. The transaction fee for the direct purchase plan is either $3 for check purchases and $2 for one-time and recurring automatic investments, plus a 3 cent per share transaction fee.  For dividend reinvestments, the transaction fees are 3 cent per share fee, in addition to a 5% fee when more than 100 shares are owned.  (Pepsi pays part of the transaction fee when the account holds less than 100 shares.)

When selling shares, an investor will pay 12 cents per share sold along with a transaction fee of either $25 or $30 depending on the type of sale (i.e., market order, batch order or day limit order).  Other fees may apply as well.

Helpful Links

Pepsico Investor Relations Website

Current quote and financial summary for Pepsico (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Pepsico

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