4. PepsiCo, Inc. (NASDAQ:PEP)
Dividend Yield as of February 14: 2.63%
Number of Hedge Fund Holders: 72
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food, snack, and beverage corporation headquartered in Harrison, New York, in the hamlet of Purchase. Overseeing the manufacturing, distribution, and marketing of its products, PepsiCo, Inc. (NASDAQ:PEP)’s business encompasses all aspects of the food and beverage market.
The company holds a 50-year track record of consistent dividend growth, and it currently pays a quarterly dividend of $1.15 per share. As of February 14, its dividend yield came in at 2.63%.
On February 13, Barclays analyst Lauren Lieberman lowered the price target on PepsiCo, Inc. (NASDAQ:PEP) to $187 from $197 and kept an Overweight rating on the shares. The analyst stated that PepsiCo, Inc. (NASDAQ:PEP)’s 2023 guidance includes organic sales growth at the high end of its medium term algorithm. However, the profit outlook came in below consensus.
PepsiCo, Inc. (NASDAQ:PEP) is a popular dividend stock among hedge funds, as 72 funds in Insider Monkey’s database owned stakes in the company in Q3 2022, compared with 65 in the previous quarter. These stakes are valued at over $4.8 billion collectively.
Lindsell Train mentioned PepsiCo, Inc. (NASDAQ:PEP) in its Q3 2022 investor letter. Here is what the firm has to say:
“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan. There are plenty of long-lived portfolio franchises I could reference here, but I’ve gone with PepsiCo (NYSE:PEP); partly because we have good time-series stats on it (beware data bias!) but also, as I hope will become evident, because Pepsi over its 129 years has succeeded in creating some wonderfully deep moats.
With Pepsi Cola you get the flagship soft drinks brand, which is both global and generational, but you also get the Frito-Lay salty snacks portfolio assembled alongside it, claiming nearly 40% of the global market. That’s ten-times greater than the nearest competitor and likely higher than the next 65 competitors combined. These are exceptionally strong global bands with market shares to match; the long-term empirical result being Pepsi’s dividend record which over the past 66 years (as far back as we’ve been able to go) has compounded at an annualised rate of 10%. Pepsi is no ‘in at the ground floor’ start-up today, but it wasn’t six decades ago either. Early growth investor Philip Fisher put it well when in 1958 (two years into Pepsi’s current winning streak) he wrote of “companies which in spite of outstanding prospects of major further growth are so financially strong, with roots going so deep into the economic soil, that they qualify under the general classification of ‘institutional stocks’”. PepsiCo fits this description well…” (Click here to see the full text)
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