Can PepsiCo, Inc. (PEP) Continue Its Success In New Markets?

Additionally, this year, PepsiCo is anticipating saving $900 million as part of a $3 billion productivity program. It is looking to invest these savings to gain share in new markets and to enhance its operating margins. In the latest conference call, PepsiCo confirmed its earlier guidance for 2013. The company is anticipating increasing its core earnings per share by 7%. The company is expecting to grow organic revenue by mid-single digits, consistent with its long-term targets.

Industry Analysis

Companies in the beverage industry offer consistent dividends with regular raises and steady price appreciation. The Coca-Cola Company (NYSE:KO) is one of the top-notch players in the beverage industry. Coca-Cola offers constantly growing dividends with stable price appreciation. The company is also backing its return with a solid financial position. The company is looking to shift its focus toward franchising. This means Coca-Cola is moving its revenue base more towards fees instead of sales. With the move in revenue generation, I think Coca-Cola will sustain its returns over the long term.

Dr Pepper Snapple Group Inc. (NYSE:DPS) is ranked as the No. 3 player in this industry. Dr Pepper Snapple is a solid company offering a dividend yield of 2.9%. In the past five years, it has been able increase its dividend by 153% along with 75.7% price appreciation. At present, the company is trading at 16.4 times to earnings. Dr Pepper Snapple Group (NYSE:DPS) is trading at a discount compared to Coca-Cola and PepsiCo. However, Dr Pepper Snapple Group Inc. (NYSE:DPS) lacks some of the economies of scale enjoyed by its peers, PepsiCo and Coca-Cola.

Final Notes

PepsiCo, Inc. (NYSE:PEP) is providing stable returns to shareholders over the years. I believe its payout ratio of around 50% is manageable. Its dividends are fully backed by solid financial position. PepsiCo has been able to generate consistently increasing profits. The company is expecting to grow its earnings per share by 7% over the next year. This indicates that the company will keep its history of consistently increasing dividends. With a forward PE of 17.1, the company has potential to keep its upward momentum.

The article Can Pepsi Continue Its Success in New Markets? originally appeared on Fool.com and is written by siraj sarwar.

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