PepsiCo, Inc. (PEP): This Company Is a Top Dividend Stock

PepsiCo Dividend data by YCharts.

As you can see, PepsiCo has managed to keep its payouts strong over the years. Yet, like any company with a decades-long track record of raising dividends, PepsiCo faces its share of challenges. Although it has done a better job than Coke at keeping its North American beverage sales up, PepsiCo still has a tough road ahead to navigate the threats to its earnings growth.

Perhaps the most interesting piece of news for PepsiCo involves speculation that it will merge with fellow snack giant Mondelez International Inc (NASDAQ:MDLZ), which got spun off from Kraft Foods Group plc (NASDAQ:KRFT) last year. Neither company substantiated the rumors, which were largely based on the fact that activist investor Nelson Peltz’s Trian Fund Management had taken substantial positions in both companies. The combination of the two companies would create a massive business that might raise some antitrust concerns, but given the merger and acquisition activity elsewhere in the food space, the prospect for a Pepsi/Mondelez International Inc (NASDAQ:MDLZ) combination is nevertheless intriguing.

When will dividends rise again?
Because it’s been almost a year since PepsiCo last raised its dividend, the company is almost due for another increase. Last year’s increase of just over 4% represented a slower pace of growth than dividend hikes in previous years, suggesting that slow sales volumes in Pepsi’s domestic beverage market might be forcing the company to hang onto more of its free cash flow. Yet, with decades of dividend increases in its history, PepsiCo seems poised to take advantage of global growth opportunities to keep shareholders happy well into the future.

The article Pepsi Is a Top Dividend Stock originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Coca-Cola, Monster Beverage, and PepsiCo. The Motley Fool owns shares of Monster Beverage and PepsiCo.

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