PepsiCo: Income at a Cost
A 4% dividend yield is drawing a lot of attention to $PEP. In my view, this fits squarely into the first category from my latest podcast episode (german): The yield is only this high because PepsiCo’s stock has been weak.
The share price has been declining for years, and not without reason: growth has stalled, margins are under pressure, and the business remains heavily dependent on the U.S. market.
For me, this is not a compelling investment right now. There’s no clear sign of improvement, and the dividend is consuming a large portion of profits that should be reinvested. The payout ratio is roughly 75% of net income on a three-year average, while meaningful investment in new products and new markets is needed to reignite growth.
What do you think? Will PepsiCo stage a strong comeback, or is this weakness likely to persist for longer?