PepsiCo (PEP) expects to return ~$9 billion to shareholders in 2015, including $4 billion through dividends and $5 billion in share repurchases.
PepsiCo is a dividend aristocrat, a term used for S&P 500 ETF (SPY) (IVV) companies that have increased their dividends for 25 years in a row. Fiscal 2015 will mark the 43rd consecutive year of annual dividend increases for PepsiCo.
PepsiCo paid a dividend per share of $0.70 on September 30, 2015. This represents a dividend payout ratio of ~193.7% given the company’s diluted earnings per share of $0.36 in 3Q15. The company’s dividend per share in 3Q15 was 7.3% higher than the comparable quarter of the previous year.
Aside from dividends, companies enhance shareholder returns through share repurchases. Share repurchases or buybacks reduce the number of outstanding shares and enhance profitability metrics like earnings per share (or EPS).
In fiscal 2014, PepsiCo returned $8.7 billion to shareholders, including $3.7 billion via dividends and $5 billion in the form of share repurchases.
In February 2015, PepsiCo announced a new share repurchase program that allows share repurchases of up to $12 billion between July 1, 2015, and June 30, 2018. This repurchase program is in addition to the company’s existing $10 billion repurchase program which spans the July 1, 2013, to June 30, 2016, period.
The company’s strong free cash flows support its dividend payments and share repurchases. In the first nine months of fiscal 2015, the company’s free cash flow came in at $5.4 billion.
PepsiCo’s current dividend yield is 2.7%. Dividend yield indicates how much cash flow investors receive for each dollar they invest.
PepsiCo’s current dividend yield is greater than consumer staples (XLP) (FXG) peers such as beverage peer Dr Pepper Snapple (DPS) and packaged food company Mondelez (MDLZ), which have dividend yields of 2.1% and 1.3%, respectively. However, closest beverage rival Coca-Cola (KO) has a higher dividend yield of 3%.