PepsiCo (PEP 0.40%) investors are feeling flush again. On Thursday morning, the beverage and snack-food giant announced plans to deliver more cash to its shareholders after it closed out a record fiscal 2021. And the management team, led by CEO Ramon Laguarta, projected another strong year ahead for sales and earnings growth.
Let's look at some highlights from the fourth-quarter earnings report, which imply more great returns for investors holding this dividend stock.
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Blistering sales growth
Pepsi ended the year on a strong note. Organic sales were up a blistering 12%, thanks to strong demand across the portfolio. The core snack-food segment, populated by brands like Doritos and Lays, grew 13% year over year. Beverage sales in the U.S. market were nearly as strong, up 12%, compared to late 2020.
Pepsi achieved a solid balance between price increases and rising volumes, too, which illustrates its strength as an inflation-resistant business. "Our ... growth meaningfully accelerated in 2021," Laguarta said in a press release. "This gives us added confidence that the investments we've made ... are working."
The company ended 2021 with 9.5% higher organic sales, setting a record for growth in its global business. Revenue was expanding at a 4% pace in 2020 and 5% in 2019 before the pandemic began disrupting global commerce.
Handling costs
Pepsi had no trouble passing along higher prices to offset rising costs and all the extra spending it has directed toward its manufacturing and supply chains. Prices jumped 7% in Q4, compared to a 5% boost in sales volumes. A portion of that increase came from consumers' demand for more premium products. But most was driven by increased prices.
Management said in a conference call with investors that these wins neutralized the impact from inflation, labor challenges, and supply-chain bottlenecks. Operating profit rose 10%, or just slightly slower than revenue. "We were able to navigate through a complex and dynamic cost environment while continuously investing in our business," Laguarta said.
Looking ahead
Pepsi isn't planning to shy away from extra spending in 2022, especially in areas like advertising and marketing. But the company still believes it can boost profitability this year. Core profits should rise by at least 8%, executives predict.
The sales expansion pace won't approach double-digit percentages again but will remain strong, thanks to market-share gains in many consumer-staples niches. Pepsi sees organic revenue rising 6% -- on top of this past year's 9.5% surge. That rate is notably faster than shareholders saw in the years leading up to the pandemic.
The returns delivered by that sales and earnings boost will be bolstered by extra cash for shareholders. Pepsi's stock-buyback spending is returning in a big way this year, rising to nearly $8 billion from just $100 million in 2021. The company also raised its dividend by 7%, beginning with its June payment. When that payout occurs, it will mark Pepsi's 50th-consecutive annual raise, and make the company a member of the exclusive club of Dividend Kings.
It's a great sign for shareholders that Pepsi can deliver that much cash to investors while investing aggressively in the business. And with sales still expanding nicely, the stock should appeal to dividend and growth investors alike.
