PepsiCo (PEP) is a Dividend Aristocrat, Champion and
blue-chip stalwart that has increased its dividend for 46 consecutive years.
Therefore, it should be no surprise that just as we saw with Procter &
Gamble in part 5, this blue-chip stalwart has traditionally commanded a higher
valuation (earnings multiple) than the average stock. Over the past couple of
decades at least, it has been a very rare occurrence to be able to invest in
this company at a valuation that would be considered reasonable or attractive.In
fact, prior to current time, it took the Great Recession of 2008 and 2009 to
bring PepsiCo down to reasonable valuation levels as measured by P/E ratios.
Although PepsiCo is not back to those recessionary levels,
its current low blended P/E ratio of 19.8 has not been available since 2013.
Consequently, although I do not consider it a screaming bargain, I do consider
it attractive relative to historical norms. To put PepsiCo’s current valuation
into perspective, this blue-chip can be purchased today with a 3.4% current
dividend yield which is hovering around the highest it has been over the past
two decades. Moreover, PepsiCo does provide the prudent investor with the
opportunity for above-average capital appreciation going forward in addition to
its high current and growing dividend yield.
Furthermore, PepsiCo appears attractively valued over
virtually every rational valuation metric that prudent value investors might
consider. Later in the FAST Graphs analyze out loud video I will value PepsiCo
utilizing several different metrics.
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