Fizz and Crunch

Austin American-Statesman Sunday - - PERSONAL FINANCE EXTRA -

Pep­siCo (NYSE: PEP) sells a wide se­lec­tion of car­bon­ated drinks, juices, teas, sports drinks, bot­tled wa­ter, pack­aged foods and Frito Lay snacks, and 22 of its brands each gen­er­ate more than $1 bil­lion in an­nual sales — in­clud­ing Chee­tos, Aqua­fina, Trop­i­cana, Quaker, Ga­torade, Lip­ton and Moun­tain Dew. In pe­ri­ods of eco­nomic uncertainty, it’s a de­fen­sive in­vest­ment that should per­form well over the long run.

Pep­siCo has been chal­lenged by slump­ing soda con­sump­tion in the U.S. and else­where, but it’s coun­ter­ing that de­cline with health­ier ver­sions of its drinks and pack­aged foods, and it’s ac­quir­ing or cre­at­ing new prod­ucts for health-con­scious con­sumers. The com­pany is also mak­ing sig­nif­i­cant progress in cre­at­ing a more ef­fi­cient busi­ness, and it has the op­por­tu­nity for con­tin­ued supply-chain and au­to­ma­tion im­prove­ments that will ben­e­fit earn­ings and cash flow.

Pep­siCo’s in­fra­struc­ture ad­van­tages help it produce goods at lower costs than those of smaller com­peti­tors, and its pow­er­ful brands give it pric­ing strength. Com­bine these com­pet­i­tive ad­van­tages with the com­pany’s potential for in­ter­na­tional growth and ongoing cost sav­ings thanks to au­to­ma­tion and other ini­tia­tives, and the com­pany still has av­enues to mean­ing­ful earn­ings growth.

Even if the mar­ket heads south for a while, Pep­siCo in­vestors are still likely to con­tinue en­joy­ing its div­i­dend, which has been hiked an­nu­ally for 45 years and re­cently yielded 2.7 per­cent. (The Motley Fool owns shares of and has rec­om­mended Pep­siCo.)

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