PepsiCo (NASDAQ: PEP) has a long history of paying out dividends to shareholders and distributed its first quarterly one in 1965. Over time, the beverage and snack company has become what's known as a Dividend King, a company in the S&P 500 that has paid and raised its dividend for at least 50 consecutive years.
As of this writing, 53 stocks are included in the exclusive list, including PepsiCo, which has increased its dividend payout for 52 straight years.
Here's how much PepsiCo pays out in dividends
PepsiCo currently pays a quarterly dividend of $1.355 per share, equating to a 12-month payout of $5.42 per share and a dividend yield of 3.1%. Despite being a Dividend King, the company's stock has lagged behind the market benchmark over the past five years with a total return of only 47.7%, compared to the S&P 500's 113.4%.
One metric PepsiCo investors should keep an eye on is the company's payout ratio, which measures the percentage of a company's profits paid out as dividends. Recent research from Hartford Funds about dividend-paying stocks suggests that 75% is a crucial threshold for a sustainable dividend. That's because when a company's earnings drop, its management often needs to pause dividend increases or cut them altogether to maintain financial stability.
PepsiCo's payout ratio stands at 76%, which isn't alarming in itself, considering it aligns with its five-year average. However, PepsiCo's recent fiscal Q3 2024 report showed a 5.5% year-over-year drop in net income, which could make management cautious about future dividend increases.
PEP Dividend data by YCharts.
Is PepsiCo stock a buy?
PepsiCo stock remains a strong choice for income-focused portfolios, with management prioritizing paying and raising its dividend. The stock currently trades at 21.6 times forward earnings, near a five-year low. The company recently announced plans to acquire Siete Foods, a Mexican-American food brand, for $1.2 billion, to spur growth.
PEP Price-to-Earnings Ratio (Forward) data by YCharts.
Should you invest $1,000 in PepsiCo right now?
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Collin Brantmeyer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
