The food and beverage industry is promising due to shifting consumer preferences toward health-conscious options, functional beverages, and eco-friendly packaging initiatives, alongside the growth of fast-food chains. This growth is supported by technological advancements like generative AI, driving improved customer experiences and overall industry growth.
This summer, it could be wise to consider investing in robust food and beverage stocks like PepsiCo, Inc. (PEP), McDonald's Corporation (MCD), and Starbucks Corporation (SBUX), as they offer appetizing dividends.
In Q1 2024, the food and beverage industry grew steadily due to strategic mergers and technology investments. This growth was fueled by changing lifestyles, urbanization, rising incomes, innovative menus in fast food, business partnerships, personalized options, plant-based choices, sustainability, and a constant stream of new flavors, driving innovation and brand success.
Consumer food and beverage preferences are dynamic, with a current focus on sustainability and health benefits driving new trends and marketing initiatives that contribute to market growth. Modor Intelligence predicts the global beverages market to reach $4.39 trillion by 2028, growing at 4.3% annually, and the fast food/quick service restaurants market to hit $316.11 billion in 2024, growing at 7.1% annually.
Furthermore, AI and tech upgrades are boosting the food and beverage market by improving data strategies, automating processes, and personalizing customer engagement. Despite challenges like inflation, the global AI in the food and beverages market is expected to reach over $48.99 billion by 2029, growing at a strong CAGR of 38.30%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three food and beverage stocks.
Stock #3: PepsiCo, Inc. (PEP)
PEP manufactures, markets, distributes, and sells beverages and convenient foods worldwide. It has seven operating segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia, and New Zealand; and China Region.
On April 30, 2024, PEP declared a quarterly dividend of $1.355 per share, a 7% increase from the previous year. The dividend will be payable on June 28, 2024, to shareholders of record as of June 7, 2024.
In terms of the trailing-12-month EBIT margin, PEP’s 14.74% is 57.5% higher than the 9.36% industry average. Likewise, its 17.83% trailing-12-month EBITDA margin is 35.9% higher than the 13.13% industry average. Its 0.95x trailing-12-month asset turnover ratio is 13.5% higher than the 0.84x industry average.
PEP has been paying dividends to its shareholders for the past 51 years. Its annualized dividend of $5.42 per share translates to a dividend yield of 3.24% on the current share price. Its four-year average yield is 2.73%. Over the past three and five years, PEP’s dividend payments have grown at CAGRs of 7.5% and 6.6%, respectively.
PEP’s total net revenue for the fiscal first quarter that ended March 23, 2024, increased 2.3% year-over-year to $18.25 billion. Likewise, the company’s non-GAAP operating profit increased 4.9% year-over-year to $2.94 billion. Also, its non-GAAP attributable net income came in at $2.22 billion and $1.61 per share, representing increases of 7.2% and 7.3% year-over-year, respectively.
For the quarter ending June 30, 2024, PEP’s EPS and revenue are expected to increase 3.6% and 1.5% year-over-year to $2.17 and $22.67 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has declined marginally to close the last trading session at $167.35.
PEP’s POWR Ratings reflect its promising prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Quality. It is ranked #19 out of 33 stocks in the B-rated Beverages industry. To see PEP’s Growth, Value, Momentum, and Sentiment ratings, click here.
Stock #2: McDonald’s Corporation (MCD)
MCD operates and franchises its restaurants internationally. The company's restaurants offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, fries, salads, shakes, frozen desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, and beverages and other beverages, as well as breakfast menu.
On May 5, 2024, MCD’s Board of Directors declared a quarterly cash dividend of $1.67 per share, payable on June 17, 2024, to shareholders of record as of June 3, 2024.
In terms of the trailing-12-month net income margin, MCD’s 33.36% is 587.8% higher than the 4.85% industry average. Similarly, its 45.84% trailing-12-month EBIT margin is 487.4% higher than the 7.80% industry average. Its 24.50% trailing-12-month levered FCF margin is 345.3% higher than the 5.50% industry average.
MCD’s annualized dividend of $6.68 per share translates to a dividend yield of 2.60% on the current share price. Its four-year average yield is 2.20%. Over the past three MCD’s dividend payments have grown at CAGRs of 8.5%. MCD has paid dividends for 22 consecutive years.
During the first quarter that ended March 31, 2024, MCD’s revenues grew 4.6% year-over-year to $6.17 billion. Its operating income rose 8.1% from the year-ago value to $2.74 billion. The company’s non-GAAP net income and non-GAAP EPS came in at $1.96 billion and $2.70, up 1.1% and 2.7% from the previous year’s quarter, respectively.
Analysts expect MCD’s revenue for the quarter ending June 30, 2024, is expected to increase 2.4% year-over-year to $6.66 billion. Its EPS for the quarter ending September 30, 2024, to increase 4.1% year-over-year to $3.32. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined marginally to close the last trading session at $257.38.
MCD POWR Ratings reflect its promising prospects and is ranked #20 out of 41 stocks in the Restaurants industry. It has a B grade for Stability and Quality. Click here, to access the additional grades of MCD for Growth, Value, Momentum, and Sentiment ratings.
Stock #1: Starbucks Corporation (SBUX)
SBUX operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates through three segments: North America; International; and Channel Development.
On June 20, 2024, SBUX approved a quarterly cash dividend of $0.57 per share, payable on August 30, 2024, to shareholders of record on August 16, 2024.
In terms of the trailing-12-month EBITDA margin, SBUX’s 19.48% is 72.8% higher than the 11.27% industry average. Its 11.38% trailing-12-month net income margin is 134.6% higher than the 4.85% industry average. Additionally, its 14.16% trailing-12-month Return on Total Assets is 236.9% higher than the 4.20% industry average.
SBUX has paid dividends for 13 consecutive years. Its annualized dividend of $2.28 per share translates to a dividend yield of 2.88% on the current share price. Its four-year average yield is 2.02%. Over the past three and five years, SBUX dividend payments have grown at CAGRs of 8.4% and 9.2%, respectively.
For the fiscal second quarter that ended March 31, 2024, SBUX reported net revenues of $8.56 billion. Its net earnings attributable to SBUX came in at $772.40 million and $0.68 per common share. Moreover, its operating income for the period was $1.10 billion.
Street expects SBUX’s revenue for the quarter ending June 30, 2024, is expected to increase marginally year-over-year to $9.25 billion. Its EPS for the quarter ending September 30, 2024, to increase marginally year-over-year to $1.06. Over the past month, the stock has increased marginally to close the last trading session at $79.28.
SBUX’s favorable outlook is reflected in its POWR Ratings. It has a B grade for Quality. It is ranked #23 in the Restaurants industry. Beyond what we have stated above, we have also rated SBUX for Growth, Value, Momentum, Stability, and Sentiment. Get all the ratings of SBUX here.
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PEP shares were trading at $166.18 per share on Wednesday afternoon, down $1.17 (-0.70%). Year-to-date, PEP has declined -0.63%, versus a 15.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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