In this article, we discuss 5 best DRIP stocks to own. If you want to read our detailed analysis of dividend reinvestments and their returns over the years, go directly to read 12 Best DRIP Stocks To Own.
5. PepsiCo, Inc. (NASDAQ:PEP)
Dividend Yield as of January 16: 2.62%
PepsiCo, Inc. (NASDAQ:PEP) is a multinational food, snack, and beverage company that specializes in the marketing, production, and manufacturing of its products. In the third quarter of 2022, the company reported revenue of $22 billion, up 8.8% from the same period last year. Its organic revenue also grew by 16% from the prior-year quarter. The company expects to pay $6.2 billion to shareholders in dividends in FY22.
PepsiCo, Inc. (NASDAQ:PEP) has been raising its dividends for the past 50 years consistently. It offers $1.15 per share in quarterly dividends and has a dividend yield of 2.62%, as of January 16. The company is among the best DRIP stocks to own because of its strong dividend policies.
In December, Argus raised its price target on PepsiCo, Inc. (NASDAQ:PEP) to $206 with a Buy rating on the shares, appreciating the company’s valuable brand portfolio and solid growth.
The number of hedge funds holding investments in PepsiCo, Inc. (NASDAQ:PEP) grew to 72 in Q3 2022, from 65 in the previous quarter. The stakes owned by these hedge funds have a total value of over $4.8 billion. Fundsmith LLP was the company’s leading stakeholder in Q3.
Lindsell Train mentioned 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)