03 May 2018 00:29
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5 years ago when I was hard at work building out diversification of my portfolio I was down to choosing between Coca-Cola (KO)), Pepsico (PEP), & Dr. Pepper Snapple (DPS). I went with DPS thinking they had better growth prospects but PEP came in second. Fast forward five years later and I had the opportunity to buy my runner-up.
Today I purchased a small position in PEP at 97.50/share which adds $37 annually to my dividend income. PEP is 20% off of its 52 week high but its current P/E 28 is still higher than its 5 year average of 24. I may have slightly over-payed however it is a small position and if prices retreat further I can add more shares.
The positive of PEP is its stable of top brand names and consistent dividend growth history. The negatives are PEP is far from breaking growth speed records and with a 72% payout ratio future dividend growth will need to come from revenue growth or share buybacks. PEP will have to perform near flawlessly to keep its consistent dividend growth of 6-7% a year.
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