Fizz and Crunch
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.)