PepsiCo (PEP 1.65%) continues to impress the market with its resilience and innovation. Its stock is up a modest 21% over the past year, and after an earnings beat in the first quarter, investors can expect more high performance from this Dividend Aristocrat.
Snack or stock, take your pick
Whether you're looking for a tasty snack, quenching drink, or high dividends, consider PepsiCo. The company's beverage division has mostly taken a back seat to rival Coca-Cola, but its diversified product line that includes snacks and breakfast products made it a much better pandemic player and keep it as a formidable performer under any circumstances.
That was loud and clear in the first quarter, when the company easily raised its prices to counter rising costs, and customers responded. Despite pressure from the supply chain and a pullout from Russia, earnings per share (EPS) increased from $1.21 last year to $1.29 this year, outdoing the average Wall Street consensus target of $1.23. CEO Ramon Laguerta said the earnings increase came from a mix of cost management and raising prices. Reported EPS increased 148% to $3.06.
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It was an altogether positive report with sales increasing 9% year over year and organic sales (revenue from existing products) up 14%. That's an impressive feat, considering it's already rebounded from the pandemic -- and even more impressive since the gain came both from increased prices and higher volume. People bought more despite the higher prices.
As has been the case recently, non-beverage products were particularly strong in North America. Sales from the Frito-Lay snack segment increased 14% year over year, and Quaker breakfast product sales increased 11%. International organic sales were also strong, increasing 15% over 2021.
The company raised its fiscal 2022 organic revenue target from a 6% year-over-year increase to 8%. It's also expecting an 8% increase in EPS. Laguerta said, "Our updated full-year guidance reflects the strength and
resilience of our categories and consumer demand trends, as well as the expected impact of higher than expected input cost inflation for the balance of 2022."
Inflation remains a volatile factor in PepsiCo's business, and stopping operations in Russia, which it did in the first quarter, will take a toll as well, eating into the company's sales.
Inching closer to Dividend King status
Back in February, PepsiCo raised its annualized dividend from $4.09 to $4.30, a 5% increase. That made 49 years of consecutive dividend raises and means the company is a year away from exclusive Dividend King status.
At the current price, PepsiCo's dividend yields 2.47%, far ahead of the S&P 500 average's yield of 1.43%.
A ballast for your portfolio
Pepsico is a secure stock with robust, long-term opportunities. It's not a high-growth stock, and investors shouldn't expect high gains from owning shares. What they should expect is a great and reliable dividend and a safe place to grow their money without much risk.
The company's stock has underperformed the benchmark S&P 500 over time, but it's outperforming it so far this year. With its efficient cost management, diversified product line, and global popularity, it may be a great stock to own in 2022.
