Dividend Stocks

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Pepsico - >>> 5 Top Stocks to Buy in January

Snack on this stock

Motley Fool

Jan 5, 2025


https://finance.yahoo.com/news/5-top-stocks-buy-january-114500102.html


Demitri Kalogeropoulos (PepsiCo): It's a new year, making it an ideal time to take a fresh look at your portfolio. That's especially true following two fantastic years for broader stock market returns. If you do, you might find that PepsiCo fits as one of your first purchases of 2025.

The beverage and snack foods giant underperformed the S&P 500 by a wide margin in 2024. That's partly because Wall Street was more interested in tech giants and companies engaged in the AI space. But Pepsi also reported some sluggish sales figures as its core consumer pulled back their spending to save cash. Organic sales growth was just 2% through the first three quarters of the year, management revealed in early October. Compare that to the 10% spike investors saw in 2023 and the 14% surge in the prior year, and it's easy to see why some investors have been disappointed.

But Pepsi is still a cash- and profit-generating machine, which means there's a good chance at a rebound for this business -- and for its stock returns -- over the next several years. CEO Ramon Laguarta and his team are projecting a bit less than 4% organic sales growth for the 2024 year and 8% higher earnings per share in that period. Investors will learn the exact figures, plus Pepsi's initial outlook for 2025, when the company announces Q4 results on Feb. 4.

In the meantime, there's every reason for shareholders to expect ample direct cash returns from this business as Pepsi sells more snack foods and beverages. For 2024, expected returns of cash to shareholders were billed at $8.2 billion, mainly through dividend payments.

Speaking of dividends, Pepsi's yield is back above 3.5%, a rate investors haven't seen since the early days of the pandemic. That unusually high payout, along with Pepsi's solid earnings generation, should help cushion returns while investors wait for a growth rebound. The timing of any sales recovery is a big question mark. But Pepsi's dividend payment is not. The Dividend King has hiked its payout in each of the last 51 consecutive years, and it's almost certain that shareholders will benefit from another increase in 2025.

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