There's a stock I've long been eager to own, but it just hasn't accommodated me by falling into a bargain-level price range -- at least not at a time when I was attentive enough to notice. It is, however, closer to that range than it's been in a while, so I've been keeping an eye on it. Perhaps you'd like to, as well, once you learn more about it -- though it's hardly an obscure concern.

Meet PepsiCo
Most people, when they think of PepsiCo (NYSE:PEP), think of beverages. And why not? It does indeed sell one of the world's top two fizzy drinks, Pepsi-Cola. And it sports many other brands, too, such as Tropicana fruit juices, Gatorade, Aquafina bottled water, Diet Pepsi, Pepsi-One, Mountain Dew, Slice, Sierra Mist, and Mug. (There are even more brands, some of which are blockbusters overseas.)

So far, it might seem like PepsiCo is a worthy rival and peer of Coca-Cola (NYSE:KO). But PepsiCo has a major asset that Coke lacks: a huge business in another industry, in the form of Frito-Lay salty snacks. Try this -- name a few major brands of potato chips, pretzels, corn chips, and tortilla chips. Odds are, you'll end up naming mostly Frito-Lay brands. They include Ruffles, Lay's, Doritos, Cheetos, Tostitos, Santitas, Rold Gold, and SunChips. Frito-Lay owns more than half of the U.S. snack industry.

Here are a few more quick statistics:

  • Annual revenues: about $27 billion
  • Number of employees: more than 143,000
  • Countries and territories where products are sold: nearly 200

While the Pepsi drink is more than 100 years old, the PepsiCo company, as we know it, has not been in its current form for too long. Pepsi-Cola merged with Frito-Lay in 1965, becoming PepsiCo. PepsiCo bought the Tropicana company in 1998, and then it snapped up the Quaker Oats Company (primarily for the Gatorade brand) in 2001.

Why PepsiCo?
So what are some reasons to like PepsiCo as a potential investment? Let me review a few and invite you to share your own thoughts on our PepsiCo discussion board.

Let's start with some impressive numbers. Net profit margins have been climbing in recent years from 10.2% in 2001 to 12% in 2002 to 13.2% in 2003. Operating margins have likewise advanced from 15.5% in 2001 to 17.7% in 2003. (Gross margins have inched down very slightly from 53.4% to 54.1%.) Long-term debt is manageable and dropped by 22% between 2002 and 2003. Return on invested capital is a very healthy 29%.

Net income rose 14.7% between 2001 and 2003, while earnings per share (EPS) rocketed ahead by 54.1%. PepsiCo is achieving this by reducing the number of shares outstanding by buying back shares. If you don't get what's happening, think of a big pizza. The pizza grew by 14.7% over two years, but it was also cut into fewer pieces, so each piece ended up being 54.1% bigger. Got it?

Another attractive number is its dividend yield, currently around 1.8%. That means that if you buy shares of PepsiCo today, you should receive the equivalent of 1.8% of your purchase price within a year -- and the same amount or more for every following year. (Of course, dividends aren't guaranteed. If the hard to imagine happens, dividends might be reduced or suspended, but I really don't expect that to happen with PepsiCo.)

Another advantage is its diversification and focus. Imagine that something crazy happens and many people stop drinking carbonated beverages. (Maybe scientists determine that drinking a lot of sugar isn't so good for you -- oops, that's already happened, yet people are still sucking down soda.) In such a situation, Coca-Cola would be in worse shape than PepsiCo, as PepsiCo has a totally different business to fall back on, in its chips.

The company is smart about partnerships, too, selling ready-to-drink Lipton tea and ready-to-drink Frappuccinos bearing the Starbucks (NASDAQ:SBUX) name. PepsiCo also snapped up the SoBe company (in 2001), getting its line of fruit-blend drinks, energy drinks, herbal drinks, teas, and dairy drinks.

PepsiCo is an innovator, as well, introducing at least 29 new products in 2003 in North America alone.

Then there's international strength. PepsiCo generates about a third of its revenues and about 20% of its net income internationally. Those are big numbers in or near the billions. Better still, they can get bigger. International markets can and do grow, and there are many more drinkers and snackers abroad than at home.

One reason I'd love to own shares of PepsiCo is because its annual report is a pleasure to read and easy to understand. Here are some snippets from the latest one (for 2003):

  • "Our businesses are strong. We rank fourth among the largest food and beverages companies in the world. (That's after Nestle (Pink Sheets: NSRGY), Kraft Foods (NYSE:KFT), and Unilever (NYSE:UN) (NYSE:UL).) We have six of the 15 largest-selling brands in U.S. supermarkets. And, around the world, 16 of our brands sell more than one billion dollars each at retail. Our products are enjoyed by people of all ages, at all times of day."
  • "Institutional Shareholder Services in 2003 reviewed and rated our corporate governance programs. PepsiCo outscored 100% of all other food, beverage, and tobacco companies and 96% of the S&P 500 companies.. To help show how, we've included in this publication a Corporate Social Responsibility Report for the first time in our company's history."

Learn more
That's just the tip of the PepsiCo iceberg. If you're thinking of investing, learn more before you do so. Read the last few annual reports. You can also share your thoughts on our PepsiCo discussion board, which you can try free right now. Or just pop in to see what others are saying.

Here are some more Fool articles on the soft-drink (and snacks) industry:

PepsiCo may not be a screaming bargain right now, but you can find attractively priced stocks that pay sizable dividends in our Motley Fool Income Investor . Check out a free trial today.

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Selena Maranjian 's favorite drink is a milk shake. She owns shares of Coca-Cola. For more about Selena, view her bio and her profile. Also, check out The Motley Fool Money Guide , Selena's tome on demystifying finance. The Motley Fool is Fools writing for Fools.