One Raise at a Time | Drink Pepsi, Get Paid

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks PepsiCo for yet another dividend increase!
Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

PepsiCo likes to announce their increases a bit differently than most companies.  You see, PepsiCo usually announces their intention to increase the dividend in early February when the report 4Q earnings for the previous year although the dividend won't be officially declared until sometime in early May.  That's just fine with me though if they want to do things differently as long as they keep bringing dividend increases to the table.  PepsiCo's press release announcing the 4Q results as well as the dividend increase can be found here.

This morning the Board of Directors at PepsiCo (PEP) announced an increase to their quarterly dividend payout.  The dividend was increased from $0.8050 per share up to $0.9275 per share.  That's a huge 15.2% raise.  PepsiCo is a Dividend Champion with 46 consecutive years of dividend increases.  Shares currently yield 3.31% based on the new annualized payout.

Since I own 62.421 shares of PepsiCo in my FI Portfolio this raise increased my forward 12-month dividends by $30.59.  This is the 5th dividend increase I've received from PepsiCo since initiating a position in December 2013.  Cumulatively, the organic dividend growth from Pepsi has amounted to 63.4% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 5.8%.  That's how you can eventually reach financial independence.

A full screen version of this chart can be found here.

PepsiCo is just a few years away from it's dividend streak turning 50 years old.  When you look back at the history of businesses very few can even last 50 years, let alone be profitable and growing year in and year out while also rewarding owners with larger dividends.

With a dividend streak over 40 years it's should come as no surprise that Pepsi's dividend growth has fluctuated throughout the business cycles as well as with the growth of the company.  However, the following chart really is a thing of beauty.  The lowest 5-year dividend growth rate since 1972 has come in at 3.96% for the period ending in 2002 and the lowest 10-year dividend growth rate has been 7.52% for the period ending 2003.  Honestly, I'd be happy if Pepsi can at least churn out 5-6% annual dividend growth which they've historically surpassed handily.

A full screen version of this chart can be found here.

*2018's dividend assumes the announced quarterly payout of $0.9275 per share is maintained for the rest of the year.

Wrap Up

This raise increased my forward dividends by $30.59 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.81% this raise is like I invested an extra $1,087 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way.  

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

Thus far in 2018 I've received 9 dividend increases combining to increase my forward 12-month dividends by $108.72.  

My FI Portfolio's forward-12 month dividends increased to $6,001.67.  Including my FolioFirst portfolio's forward dividends of $78.03 brings my total taxable accounts dividends to $6,079.70.  My Roth IRA's forward 12-month dividends remain at $336.46.

Do you own shares of PepsiCo?  Did you expect dividend growth to be even close to this number?

Please share your thoughts below.


  1. JC, You made my morning. Great increase from PEP! Tom

    1. Tom,

      Glad to hear that. Pepsi made my morning with that 15% increase. I figured 6-9% was in the cards so I was more than happy to see 15%.

      Thanks for stopipng by!

  2. Congrats on this great raise. I never knew how diversified they were and that growth rate is fantastic.

    1. Passive Canadian,

      Pepsi has 22 brands that generate over $1 B of revenue each year. That diversification is huge and I love that they are both drinks and snacks too. The dividend growth has been fantastic since I purchased shares and I have to say I didn't think a 15% increase was in the cards for this year. But I'll take it nonetheless.

      All the best.

  3. PiP -

    LOVE THIS. Nice post, as always.


    1. Lanny,

      Ha! I loved it too. I have to say I've been a bit surprised with some of these dividend increases. Guess the tax cuts really are going towards dividends. Either way I'm a happy shareholder.

      Thanks for stopping by!


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