The Best Beverage Stock To Buy
Mitchell Clark: PepsiCo, Inc. (NYSE:PEP) is breaking out after a prolonged price consolidation since this time last year.
This mature enterprise fits into the very-slow-growth category, but the company offers a solid dividend. The stock is currently yielding three percent.
Some big investors are after PepsiCo to spin off its snacks business, but management has been reticent due to the fact that growth in beverages has been slow going.
Spin-offs or break-ups are typically wealth-creating for shareholders, but they can be one-time wonders.
Last quarter, PepsiCo’s earnings per diluted share grew a solid 14.5% on the back of flat revenues.
The company certainly could surprise the marketplace with a spin-off plan, but this is not really expected. The stock would soar on the news, however.
The Coca-Cola Company (NYSE:KO) is actually yielding the same three percent currently. Over the last two years, PepsiCo has significantly outperformed Coca-Cola on the stock market, but both positions tend to go back and forth.
I don’t consider either company particularly attractive at its current price, but their yields are, and it would be reasonable for investors to expect earnings growth combined with an annual dividend of approximately 10% from either company.
Dr Pepper Snapple Group, Inc. (NYSE:DPS) is a much smaller company compared to Coca-Cola or PepsiCo. It’s done a lot better on the stock market comparatively over the last five years. This stock currently yields just less than three percent, but its growth is slowing.
With such international businesses, currency risk is a major issue and when you have country-specific problems like what recently transpired in Venezuela, it can wreak havoc with earnings.