We recently published a list of 10 Best Dividend-Paying Beverage Stocks to Buy. In this article, we are going to take a look at where Keurig Dr Pepper Inc. (NASDAQ:KDP) stands against other best dividend-paying beverage stocks to buy.
The American consumer staples industry is currently dealing with an evolving landscape, with a key shift being the heightened influence of health considerations on consumer behavior. Health and wellness are now common themes of interest among the younger generation of consumers and the prevalence of weight-loss drugs has also led to a change in consumer’s eating habits, including both reducing appetite and altering the kind of foods and drinks they want.
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Many industry players have realized that they’ll need to evolve and keep up with their consumers in order to achieve success. A great example is how an increasing number of beverage companies are now working to deliver more with their products, with one prominent trend being better-for-you (BFY) drinks. These are beverages that go beyond the scope of mere hydration and provide a solid benefit, such as supporting energy, gut health, cognition, immunity etc. However, in order for it to sell, a drink also needs to taste good, which presents a challenge in itself since the modern consumer is also wary of high sugar levels and artificial sweeteners. As a result, many industry players are now experimenting with natural sweeteners like allulose, stevia, and monk fruit alongside advanced sweetness modulation technologies.
Another major beverage category that is rapidly evolving with shifting consumer trends is that of alcohol. The rising importance of health and wellness has led to an increasing number of younger people drinking less alcohol, with many giving it up altogether. As a result, nearly every major alcohol company has come up with no- and low-alcohol versions of their highly acclaimed brands, making sure they don’t miss out on their share of a market that is becoming more and more established every day. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before. Sales of Guinness 0.0, the zero-alcohol version of the highly beloved Irish stout, surged by nearly 50% between February 2023 and February 2024, putting it among the Best Selling Non Alcoholic Beers in the US.
A recent looming threat for the American beverage industry has emerged in the form of tariffs. President Donald Trump has announced a 25% tariff on all steel and aluminum being imported into the US, eliminating previous country exceptions and exemptions. The blanket tariffs, set to go into effect next month, will have serious consequences for the beverage industry since nearly 75% of all new beverage launches in North America now appear in aluminum cans, according to supplier Crown. An increase in input costs will inevitably lead to a rise in prices for end consumers, causing serious problems for some beverage categories that are already struggling, such as craft beer. A short-term solution could be resorting to alternative packaging materials, such as glass or plastic, but that will undoubtedly come with its ecological concerns and ramifications. Or perhaps, this packaging problem could be a blessing in disguise and lead to some much-needed creative destruction and forever change the industry, since the drinks aisle has always been a hot spot in terms of innovation.
According to data from Janus Henderson’s Global Dividend Index, the global beverage industry paid a total of $9.6 billion in dividends in Q3 2024, up 31.5% YoY and 96% more from the same period in 2019. However, the Food & Beverage index, which represents companies across various sub-industries in the sector, has delivered modest returns over the last year. The index has risen by 4.62% over the last 12 months, against gains of almost 22.9% by the broader market.
Methodology
To collect data for this article, we looked up various companies working in the beverage sector, picked out the ones that pay dividends, and ranked them by their number of hedge fund investors according to the Insider Monkey database, as of Q3 2024. Following are the Best Beverage Dividend Stocks to Buy Now.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A conveyor belt filled with assorted K-Cup pods, ready for packaging.
Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 38
Keurig Dr Pepper Inc. (NASDAQ:KDP) is a leading beverage company in North America with a portfolio of more than 125 owned, licensed, and partner brands, leading the way in a wide range of refreshing beverages. The company owns the #1 single-serve coffee system in the US (Keurig) and has grown Dr. Pepper to become the second-largest soft drink brand in America, having overtaken Pepsi by the end of 2023.
Keurig Dr Pepper Inc. (NASDAQ:KDP) delivered net sales of $3.89 billion in Q3 2024, up 2.26% YoY but missing analysts’ estimates by $31 million. The company’s core refreshment segment, which includes Dr. Pepper, Snapple, Canada Dry, and Sunkist, continued to perform well in Q3 2024, with revenue jumping 5.3% YoY to $2.4 billion. KPD also remains financially strong and reported more than $500 million in free cash flow during Q3, keeping it on track for a meaningful step-up in full year cash flow compared to 2023. The company declared a regular quarterly cash dividend of $0.23 per share this month.
Keurig Dr Pepper Inc. (NASDAQ:KDP) announced in October 2024 that it has reached an agreement to purchase a majority stake in energy drink maker GHOST for $990 million, with plans to purchase the rest in 2028. The brand will complement KDP’s existing energy portfolio and substantially enhance its presence in the category. However, the acquisition comes at a time when the energy drink category has slowed down in the US, largely due to weak traffic at convenience stores.
Oakmark Select Fund stated the following regarding Keurig Dr Pepper Inc. (NASDAQ:KDP) in its Q4 2024 investor letter:
“Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of North America’s leading beverage companies, with dominant positions in single-serve coffee and flavored soft drinks. The soft drink portfolio has an impressive track record of volume growth and market share gains. We believe this performance can continue due to favorable demographic trends, brand strength, and distribution advantages. Recently, weakness in the Keurig coffee division caused the stock price to come under pressure. However, we believe these industry-wide challenges will prove transitory because coffee remains a popular beverage. Keurig’s coffee division is poised to capitalize on this demand with the largest installed base of single-serve brewers and ample runway to increase household penetration. At the current quote, the market ascribes minimal value to Keurig. We were happy to purchase shares in this above-average business at a discount to the market multiple, other beverage peers and private market transactions.”
Overall, KDP ranks 6th on our list of best dividend-paying beverage stocks to buy. While we acknowledge the potential for KDP to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KDP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.