Rising inflation and the uncertainty of the economic recovery amid the spread of the COVID-19 omicron variant has fostered investor caution over where to invest next. In the current market and economic scenario, dividend stocks can be a handy in ensuring a steady stream of income.
Beverage companies are meeting the latest demands in the healthy, refreshing, and ready-to-drink beverages segments. Various social and cultural changes are helping to bring new products and ideas to the beverage market. And according to a Fior Markets report, the global non-alcoholic beverages market is expected to grow at an 8.2% CAGR to $1.73 trillion by 2028.
Given this backdrop, we think it could be wise to bet on fundamentally strong beverage stocks The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP). They also pay regular dividends and have solid growth potential.
The Coca-Cola Company (KO)
Famous beverage company KO in Atlanta, Ga., manufactures, markets, and sells various non-alcoholic beverages worldwide. It provides sparkling soft drinks, water, enhanced water, juice, dairy, and syrups. In addition, it sells products under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, and Fanta brands.
On Nov. 1, 2021, KO announced that it would complete the acquisition of the remaining stake in BodyArmor for $5.60 billion. This deal will likely help the company expand its reach.
The company began paying dividends in 1989. Over the last three years, KO’s dividend payout has grown at a 2.5% CAGR, while its four-year average dividend yield is 3.21%, and its current dividend payout translates to a 2.76% yield.
KO’s net operating revenues increased 16% year-over-year to $10.04 billion for its fiscal third quarter, ended Oct. 1, 2021. The company’s net income increased 42% year-over-year to $2.47 billion. Also, its EPS came in at $0.57, representing a 41% increase year-over-year.
Analysts expect KO’s EPS and revenue for its fiscal 2021 to increase 17.4% and 15.5%, respectively, year-over-year to $2.29 and $38.13 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 16.5% in price to close yesterday’s trading session at $60.79.
KO’s POWR Ratings reflect solid prospects. According to our proprietary rating system, the stock has an overall B rating, which translates to a Buy. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
KO has an A grade for Quality and a B grade for Stability and Sentiment. It is ranked #11 of 35 stocks in the B-rated Beverages industry. Click here to see the additional ratings of KO for Growth, Value, and Momentum.
PepsiCo, Inc. (PEP)
PEP is a global food and beverage company that is headquartered in Harrison, N.Y. It operates in the Frito-Lay North America, Quaker Foods North America, PepsiCo Beverages North America, Europe, and AMESA segments.
The company began paying dividends in 1989. Over the last three years, PEP’s dividend payout has grown at a 5.79% CAGR, while its four-year average dividend yield is 2.89%, and its current dividend payout translates to a 2.47% yield. PEP is expected to pay a $1.075 per share quarterly dividend on Jan.7, 2022.
For its fiscal third quarter, ended Sept. 4, 2021, PEP’s net revenue increased 11.6% year-over-year to $20.18 billion. The company’s gross profit increased 8.6% year-over-year to $10.79 billion. Its net cash from operating activities for the nine months ended Sept. 4, 2021, increased 8.3% year-over-year to $6.63 billion.
For its fiscal 2021, PEP’s EPS and revenue are expected to increase 13% and 11.2%, respectively, year-over-year to $6.24 and $78.28 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 21.4% in price over the past nine months to close yesterday’s trading session at $173.82.
PEP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. PEP has a B grade for Stability and Quality. It is ranked #10 in the B-rated Beverages industry. To see the additional ratings of PEP for Growth, Value, Momentum, and Sentiment, click here.
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KO shares were trading at $60.62 per share on Thursday morning, down $0.17 (-0.28%). Year-to-date, KO has gained 2.38%, versus a -1.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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