10 Stocks Taking Care of Investors: No. 9 PepsiCo (PEP)

June 9, 2009 3:29 PM EDT

These 10 stocks have been rewarding investors with share buybacks, strong dividends, sales/earnings and stock performance and are worthy cornerstones of any portfolio. You can track the entire series here.

Number 9: PepsiCo, Inc. (NYSE: PEP)

PepsiCo is not only about beverages, it is also a leader in snacks and other food. PepsiCo runs Frito-Lay and Quaker Foods, and has many famous brands including Pepsi, Mountain Dew, Gatorade, Tropicana, Dole, Lay's, Doritos, Cap'n Crunch cereal, Rice-A-Roni and many others. PepsiCo controls 39% of the U.S. snacks market and 25% of the U.S. beverage market. In a recent move, PepsiCo has been trying to acquire its two largest anchor bottlers, The Pepsi Bottling Group (NYSE: PBG) and PepsiAmericas (NYSE: PAS), although those companies have resisted the overtures.

Shares Buybacks: PepsiCo bought back $4.7 billion in shares in 2008. During the third quarter of 2008, PepsiCo completed their $8.5 billion repurchase program publicly announced on May 3, 2006 and began repurchasing shares under a new $8.0 billion repurchase program authorized by the Board of Directors in the second quarter of 2007 and expiring on June 30, 2010. In 2009, PepsiCo intends to spend up to $2.5 billion repurchasing shares, although they didn't buyback any shares in Q1. PepsiCo has approximately $6.4 billion remaining under its current repurchase program.

Dividends: In May of 2008, PepsiCo raised its annual dividend from $1.70 to $1.80. In the second quarter of 2008, PepsiCo raised the dividend from $1.50 to $1.70 per share. In 2002, PepsiCo's dividend was just $0.60 per share annually. That's a 3-fold dividend increase in 7 years. The current dividend yield is a solid 3.35%.

Revenue/Profit: In 2008, PepsiCo grew its revenue 10% to $43.25 billion, although operating profit fell 3% due to lower margins and forex. PepsiCo earned $3.21 per diluted share in 2008 and is expected to earn $3.68 per share in 2009. Management operating cash flow for 2008 was $4.65 billion, up from $4.55 billion in 2007 and $4.065 billion in 2006. In the first quarter of 2009, PepsiCo earned EPS of $0.71, ex-items, above the consensus of $0.67.

Stock Performance: Shares of PEP are down 17.8% over the last year, which is better than the 31% slide in the S&P 500. Shares of PEP are down 1% over a 5-year period, versus a 16% slide in the S&P 500. Over a 10-year period, shares of PEP are up 48%, versus a 29% slide in the S&P 500.

With billions in share buybacks, huge dividend increases, solid revenue growth and a market-beating stock performance, PepsiCo is "taking care of investors".

Disclosure: Article writer owns PEP in his IRA.

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• 10 Stocks Taking Care of Investors 2009

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