2023 Week 19: PepsiCo Inc (NASDAQ: PEP)

Portfolio Update

The FiveTwenty portfolio received $265.27 in dividends in the past week. BMY, T, and VZ paid their quarterly dividend during the week.

Past Week Dividend$265.27
Current Quarter Dividend (Q2 2023)$577.95
LifeTime Dividend$10,751.33
Estimated Annual Dividend$9,162.78
Dividend Scorecard

The capital allocation for the week of 05/07/2023 to 05/13/2023 will be used to add to our position in PepsiCo Inc (NASDAQ: PEP).

PEP – Position Update

Since our last check-in on PEP in week 9 of 2023, the company reported Q1 2023 earnings on 04/25/2023. Furthermore, the share price increased 10.4% from $175.95 to $194.27.

TTMPrev. Update10-year median
Dividend Streak50 years50 years
Yield2.37%2.57%2.75%
Payout Ratio65.71%166.64%2
P/E27.75125.962
Entry Criteria Scorecard

1 computed using adjusted (core) EPS of $7.00 as of Q1 2023
2 computed using adjusted (core) EPS of $6.79 as of Q4 2022

Q1 2023 earnings report

Did PEP’s latest earnings report raise any warning flags?

PEP reported strong financial results for Q1 2023. The company experienced double-digit revenue growth propelled by strong growth across geographies and business segments. Overall, revenue grew 10.2%, core net income increased 15.4%, and core EPS were 16.3% higher than in Q1 2022.

Revenue
(in millions)
Core Net Income
(in millions)
Core EPS
.
Q1 2022$16,200$1,795$1.29
Q1 2023$17,846$2,071$1.50
% Change10.2%15.4%16.3%

Additional noteworthy developments during the quarter:

  • As expected, on 05/02/2023 the company declared a quarterly dividend of $1.265 per share (a 10% increase over the year ago period) payable on 06/30/2023 to shareholders of record on 06/02/2023.

Looking ahead, owing to a strong Q1 PEP revised its FY 2023 forecast upwards. The company now expects organic revenue growth of 8% (previously 6%) and core EPS growth of 9% (previously 8%).

Thesis

Why are we adding to our position in PEP?

Strong Q1 2023 results, increased our confidence that the 10% increase in the quarterly dividend does not put the long-term sustainability of the dividend at risk. Therefore, we are adding to our position ahead of the upcoming ex-dividend date of 06/01/2023.

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