Tuesday, February 25, 2014

Recent Buy

Well I just couldn't help myself this past Friday and made another purchase.  It wasn't that long ago that I had doubled up my position in PepsiCo, February 14th to be exact but the price continued to decline so I added some more.  I was fairly impressed with their 4Q and full year 2013 results and really like their outlook going forward.  Despite being named PepsiCo, they are much more than a soda company.  Besides the namesake brand of cola they have several other soda, tea, coffee, and juice brands under their control as well as a hefty snack division.  Like a lot of the large cap US consumer staple companies, the domestic market is pretty much fully developed and in some instances, like soda consumption, declining.  Fear not though as PepsiCo has a large presence in the developing and emerging markets and that's exactly where the real growth will come from.



On Friday, February 21st I purchased 20 more shares of PepsiCo for $78.16 per share.  After commission this lot carries a $78.56 per share cost basis.  PepsiCo also announced a 15% increase in their quarterly dividend to $0.655 per share starting with the June payment.  Based on the increased dividend, this share lot carries a 3.34% YOC and will provide $52.40 in dividends.  I was able to purchase the shares around where my calculated target entry price is at so I'm quite happy with the purchase.

I didn't initiate my position in PepsiCo until late last year because it always seemed a bit overvalued whenever I had free capital.  But I've built it up to a good size position now with the 2 purchases this month and now own 61 shares which currently represents about 3.9% of my portfolio.  I want to get Coca-Cola and PepsiCo on par with each other as far as portfolio weighting is concerned so there's still a bit more work to do there if the prices continues to decline.  Even more so if I get a chance to add to my Coca-Cola position which I'm very close to doing as well.

The new lot of shares were purchased for a 3.88% discount to my previous cost basis of $81.73 and lowered my average cost basis for the position by 1.27%.  The new adjusted cost basis is $80.69 per share and I'd love to be able to get that down underneath $80 with another purchase.  Hopefully Mr. Market gives us all the opportunity to average down some positions.  Consequently, my YOC for the position increased from 3.21% to 3.25% and the whole position will provide $160.18 in annual dividends before future increases or reinvestment.

The YOC for my portfolio is now at 3.57% which is pretty good considering the current yield is 3.13%.  My forward 12-month dividends are now at $3,993.14 which is 79.86% of the way towards my goal of $5,000 by the end of 2014.  I'm slowly inching my way towards and past the $4,000 mark.

I've updated my Portfolio page to reflect this purchase.

19 comments:

  1. Good buy JC. Pepsico's results were pretty good and you've got to love a 15% dividend raise. What companies are you thinking about next....or are you still building cash for a rental?

    -Bryan

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    Replies
    1. Bryan,

      Hopefully build some more cash and then make a move on a rental property. Ill have to look around and get back to you on other companies I like right now. Off the top of my head PEP, KO, WMT, TGT and PM are all at fair value or undervalued.

      Thanks for stopping by!

      Delete
  2. Internationally I don't see Pepsi anywhere, never have.

    ReplyDelete
    Replies
    1. I don't get Booban's response. PepsiCo is big in markets like Russia. Remember Khrushchev drinking a Pepsi in 1960s ;-)

      But seriously Booban, please read this presentation: http://www.pepsico.com/Assets/Download/Barclays_2013.pdf

      Enjoy!

      PS I own much more PEP than KO, and very little DPS. I am stocking up on KO now, but I do dig snacks and drinks together that PEP has. Incidentally, if KO had bot Frito-Lay, it would have provided much better returns to shareholders. But KO balked at it.. Big mistake, although they did pretty well for stockholders anyways ;-)

      Delete
  3. Hi JC
    Congratulations! very nice purchase.
    DH

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    Replies
    1. Dividend Hawk,

      Thanks. I think theres some good value here with PEP.

      Thanks for stopping by!

      Delete
  4. One more purchase or a couple of reinvestments and you are sailing right past the $4,000 mark in forward 12-month dividends. Pretty awesome!

    ReplyDelete
    Replies
    1. W2r,

      I might be over right now depending on how the VID/VS deal worked out. I just received my shares in VZ but VOD did a reverse split and so the dividend changed as well as the share count. That's going to be a mess to get the accounting done right in my spreadsheet. I can't wait to cross the $4k level though.

      Thanks for stopping by!

      Delete
  5. I bought pepsi recently as well. Good to see you buy as well. :)

    Now eyeing on DE KO and TGT. Any thoughts ?

    ReplyDelete
  6. PEP is one I need to get me hands on. Good buy.

    ReplyDelete
  7. Booban,

    Thanks for the boots on the ground information. Out of curiosity where are you or have you been? Just trying to get an idea of what we're looking at. What about some of the other non-namesake products like their other sodas, juices, teas, and of course chips and other snack foods?

    Thanks for stopping by!

    ReplyDelete
    Replies
    1. Guess I can't say I've been everywhere but Europe and Asia, Pepsi doesn't exist outside of exclusive deals an American fast food franchise might make. You can find it behind the stacks of coke in super markets. Dr Pepper exists as a few cans if you're lucky. All the other products, snapple? Mountain Dew? Uh?

      Delete
    2. I'm here touristing the states now and almost nothing you can find in a convenience store exists in my home country, Sweden. There is tropicana which is really expensive and Pringles which are good but not as good as the local competitors, their chips look like real chips and not made of some potato mush. There are cheaper versions of soda products with similar syrup, cola, fanta, Sprite flavors. Twinkie? Never seen one outside the US. All those snacks and drinks have local equivalents. Coca cola is the only presence which stands out. It's gigantic wherever I have been in the world.

      Delete
  8. Hi PIP,

    since yesterday, I wonder which company I should buy in March.
    On my blog I have make a poll and from 10 companies the most say buy BASF (Germany) and Philip Morris (USA).
    I am very indecisive...
    It´s a hard choise this month!

    Best whishes!
    D-S

    ReplyDelete
  9. Solid buy with PEP especially after the recent 15% dividend boost. I need to increase PEP to match KO now after my recent KO purchase. I especially like that PEP gets you diversified into snack foods that you don't get with KO.

    ReplyDelete
  10. Pursuit,

    Great buy here. I can't understand how PEP declines after a solid quarter and massive dividend increase, but it's a great opportunity for long-term shareholders.

    I like both beverage giants here for different reasons.

    Best regards.

    ReplyDelete
  11. i think PEP gives you some additional protection from declines in soft drink sales that is "hurting" KO right now. While I like KO because it's more global and less exposed to the US, Pepsi's snack food sales don't seem to be as impacted by changing consumer habits.

    ReplyDelete