With a nasty couple weeks in the market, thought I would troll some of my watchlist stocks to see if there was anything worth adding to my portfolio. Initially, I took a look at Starbucks (SBUX), a company I often frequent and admire, but still find the price of the stock too expensive. I also looked at Coca Cola (KO) and Pepsi, both good solid companies, but every time I’ve looked at them in the past, they’ve seemed a bit pricey. Now that both companies are trading close to their 52-week lows, yielding around 3%, and usually do okay regardless of the economy, I’m intrigued. But I’m going with Pepsi over Coke this time since it seems to be better valued when looking at the PEG ratio and dividend yield. Also, PepsiCo is more diverse with its food and snack businesses, which may be split at some point to increase the overall value of the company. Pepsi has also made some recent deals in fast growing markets such as China and Latin America, which may be a catalyst to increase market share in these fast growing markets.
– Pepsi has a 5-star Motley Fool CAPS rating.
– Pepsi currently yields 3.3%. It has raised dividends for 39 years averaging 12.3% annually.
– Recent deals in China and Brazil may increase growth prospects.
– Splitting portions of the business up may unlock potential value in the future.
Current price: $62.40 per share