Is PepsiCo a company that just merely sells Pepsi? 

The answer is no. Today, we may consume a variety of food & beverages, where their brands are owned by PepsiCo. To name a few, they include Mirinda, Fritos, Cheetos, Lay’s, 7Up, Lipton, Mountain Dew, Quaker, and Gatorade. As such, this shows that PepsiCo has evolved into an owner of global F&B brands. 

In this article, I’ll cover its long-term financial results and valuation. Hence, here are 8 things to know about PepsiCo before you invest. They are as follows: 


1. The U.S. remains PepsiCo’s Biggest Market in 2023. 

PepsiCo had derived US$ 49 billion (57%) of its total revenues from the U.S. and US$ 37 billion (43%) of its total revenues from other global markets. From all its global markets, Europe remains PepsiCo’s largest sales contributor in 2023. This is followed by Latin America, the Africa, Middle East & South Asia (AMESA), and the Asia Pacific markets. 

Source: PepsiCo’s Annual Report 2023


2. “North America” Segment has 3 Business Divisions

PepsiCo has segregated its North America segment (the U.S. and Canada) into 3 different business divisions: Frito-Lay, Quaker Foods, and PepsiCo Beverages. As for 2023, PepsiCo Beverages and Frito-Lay are the two largest sales contributors to the North America segment as they had accounted for 95% of total revenues for this segment.

Source: PepsiCo’s Annual Report 2023


3. Major Acquisitions in the Past 5 Years

Since 2018, PepsiCo had completed several key acquisitions as follows: 

SodaStream is a manufacturer and distributor of sparkling water makers. Today, it falls under PepsiCo’s Europe segment. Meanwhile, Pioneer Food and Rockstar are well-known F&B companies operating in South Africa. Upon acquisitions, its AMESA segment increased its sales from US$ 3-4 billion a year to as high as US$ 6-7 billion per annum in 2021-2023. Whereas, Be & Cherry is one of the biggest online snack companies in China. It is included under its Asia Pacific segment. 

Collectively, their total acquisition costs amounted to US$ 9.05 billion which is a relatively small figure when compared to its annual revenues. Hence, they have contributed to small growth in revenues to PepsiCo in 2021-2023. 


4. PepsiCo Attained 10-Year CAGR of 3.0% in Net Income. 

PepsiCo attained a 10-Year CAGR of 3.3% and 3.0% in revenues and net income. It generated US$ 60-70 billion in revenues in 2012-2018. Then, its revenue grew up to US$ 91.5 billion in 2023. This caused its net income growth to be flat over the 6-year period in 2012-2018. Then, its net income grew to US$ 9.07 billion in 2023, the highest in 10 years. 

Source: PepsiCo’s Annual Reports


Here are a list of one-off events that impacted PepsiCo’s net income: 


5. PepsiCo Generated on Average US$ 10 billion in OCF a Year.

PepsiCo generated US$ 107.3 billion in operating cash flows in 2014-2023. So, it worked out to be US$ 10+ billion in OCF per annum. In addition, it had raised as much as US$ 26.8 billion in long-term borrowings. 

During the period, PepsiCo had spent most of them in the following: 

  • US$ 50.9 billion in dividend payments. 
  • US$ 37.3 billion in net property, plant & equipment (PPE)
  • US$ 21.2 billion in net share buybacks. 
  • US$ 7.8 billion in net acquisitions of businesses. 

Source: PepsiCo’s Annual Reports

6. PepsiCo’s Initial Dividend Yields Maintained at 2%-3% a year.

DPS had increased from US$ 2.13 in 2012 to US$ 4.945 in 2023. The increase was funded by stable operating cash flows at that time.

Source: PepsiCo’s Annual Reports

PepsiCo maintained its initial dividend yield at 2%-3% a year levels. It is because both PepsiCo’s stock price and DPS increased in the period. On 5 April 2024, its stock price was trading at US$ 191.68 per share. Thus, its initial dividend yield is 2.40% per annum, based on its latest 12-month DPS of US$ 4.945. 

The net dividend yield would lower after deducting 30% withholding tax. 

Formula: 
= (DPS / Stock Price) x 100% 
= (US$ 4.95 / US$ 169.65) x 100% 
= 2.91% (excluding 30% withholding tax) 

After factoring 30% withholding tax, its net dividend yield would be 2.04%. 

Calculated from PepsiCo’s Financial Data; Stock Price from Google Finance


7. PepsiCo’s P/E Ratio Averages 23.5 in the last 10 Years. 

P/E Ratios in 2019-2023 were much higher as compared to P/E Ratios in periods before 2019 (2012-2018). This is because its stock price grew at a faster pace as compared to its earnings growth. 

Overall, based on the last 10 years, its P/E Ratio averages at 23.5. 

But, if it is based on the last 5 years (shorter), its P/E Ratio averages at 25.7. 

Calculated from PepsiCo’s Financial Data; Stock Price from Google Finance


Conclusion: 

PepsiCo has grown from being a “Pepsi manufacturer” to a global F&B player as it now owns multiple well-known F&B brands internationally. PepsiCo derived a larger portion of revenues and profits from the U.S. market but is committed to expanding its international reach as it acquired new F&B companies globally. As a result, its financial results have improved in 2019-2023 with higher revenue & profits, which in turn, enabled it to pay out higher dividends to shareholders. In closing, the consideration for investors would be on its suitability, valuation and preference in our portfolios respectively. 

There you go, the 7 things to know about PepsiCo before investing in it.

I believe it is best to first understand the educator’s mindset and skill sets when investing before signing up for a course. Thus, if you intend to build a Growth-based Portfolio filled with the top 1% companies listed in the United States, check out our free 1-Hour online webinar training on growth investing:

Link:
Online Training: Case Study of 1 Actual Stock that I had Invested in and Why It Doesn’t Take High Risk to Generate High Returns in the Stock Market?


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

Leave a Reply

Your email address will not be published.