A Refreshing Stock For Any Retirement Plan - Pepsi

In retirement, when you look for the stock of a company to own, you want to see world class brands.

The company must have worldwide product distribution, and have a long history of excellent financial performance.

The dividend yield should be at least 3% and there should be a path for future growth. The price of the stock should be historically cheap and the company should provide growth and income with the prospect of a relatively high degree of safety.

 We have found all of this and more in the stock of Pepsico.

The snack food and cola giant manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods in over 200 countries. Its PepsiCo Americas Foods unit offers salty and sweet snacks such as Lays potato chips, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, branded dips, Fritos corn chips, Ruffles potato chips, Quaker Chewy granola bars, SunChips multigrain snacks.

The company' PepsiCo Americas Beverages unit sells beverage concentrates, fountain syrups, and finished goods under the Pepsi, Mountain Dew, Gatorade, 7UP, Tropicana Pure Premium, Sierra Mist, Mirinda, Tropicana juice drinks, Propel, Dole, Amp Energy, SoBe Lifewater, Naked juice, and Izze beverage names.

Pepsi stock is still very cheap on an historic basis with a P/E ratio of less than 15. It usually sells for a P/E ratio of near 20. Last year, Pepsico shares gained a modest 11% as the stock underperformed the 19% gain in the Dow Jones industrial average. Since the beginning of this year, Pepsi has traded relatively flat despite the January sell-off in the broader market.

Current consensus estimates expect PepsiCo to grow earnings over the next five years by 10% per year. This is consistent with their 20-year rate of growth of 9.6% and only modestly lower than their growth since calendar year 2000 of 12.8% which included the two most recent recessions of 2001 and 2008.

The firm will report earnings on February 11, 2009, and give an update on the recent acquisition of their bottling firms. That purchase is expected to be accretive to earnings in the immediate term. Wall Street is looking for this acquisition to be completed in the next few weeks. This will likely remove some uncertainty for investors and allow Pepsi to better control its distribution channels.

Pepsi has over 3 billion dollars of cash on hand and pays a 3% dividend yield. The dividend has increased three-fold since the year 2000. The company has a huge cash flow giving the dividend plenty of room for growth.

Pepsi is focused on global markets. Its CEO is of Indian descent and she understands how to do business overseas. The risk to the stock price in 2010 is in currency fluctuations, the prospect of a double dip global recession and increasing product commodity prices.

Pepsi has all the attributes we are looking for in a Retirement stock holding. eWorldvu is buying 200 shares for the Model Retirement Portfolio on any stock market weakness using a good to cancel order. Purchase will be made when the stock next falls to $60. We see a 20% increase in the price of the stock during the next twelve months, in addition to the 3% dividend.

(eWorldvu members currently own the stock of Pepsi. As always do your own due diligence before buying any stock.)

http://www.eworldvu.com

Update on Thursday, February 4, 2010 at 10:41AM by Jim Smith

200 shares of Pepsi bought at 60.   S and P is 1075