Time for a Performance Check

For some background on the idea behind the Performance Check, and the XIRR function used for the calculations, please see my first post in this series – Performance Check – PG

I’m continuing my performance check series with a look at the fourth dividend paying stock I ever purchased for my Portfolio.  The stock is Pepsico (PEP), which is part of the Consumer Staples sector.

PEP doesn’t need much of an introduction since it’s familiar to so many, but I’ll provide some high level notes.  Pepsico is a leading global food & beverage company.  Brands include Pepsi, Lay’s, Tropicana, Quaker and Gatorade, among many others.  In fact, Pepsico has 22 billion-dollar brands.  A little history from the company website… “PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay.  Pepsi-Cola was created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist.  Frito-Lay, Inc. was formed by the 1961 merger of the Frito Company, founded by Elmer Doolin in 1932, and the H. W. Lay Company, founded by Herman W. Lay, also in 1932.”

PEP has a long history of increasing its dividend, having done so for the past 44 years, including an annual increase announced last May of 6.98%.

Just like the previous 3 stocks I reviewed, my PEP position is one I initiated many years ago.  Thus, I have lots of data/time to factor into the return calculated in this Performance Check.

 

My Personal Performance for PEP

My initial purchase of PEP came in early 1997 in a Dividend Reinvestment Plan, or DRiP, that I opened at the same time.

Below is a capture of the spreadsheet I keep with the PEP cash flows, and the calculated XIRR.  Once again, the table is a bit long for this post due to all the entries, so I broke it up into 2 pieces, duplicating the header each time.

Here are some notes with regard to the ‘Type’ column entries:

OCP = Optional Cash Purchase;  EOY Value = End Of Year Value

Note – the prices reflect a spinoff of Tricon in Sept. 1997.

The duplicate EOY Value entries at the end of each year (one negative, one positive) do not affect the cash flow, and can be thought of as boundary markers, allowing me to make the individual yearly return, and the annualized total return calculations.

 

 

You’ll notice there has been only one withdrawal over the 20+ years I’ve had PEP.  This came in 2016 when I had to sell the fractional shares as a result of closing my DRiP account and transferring the shares to my brokerage account (I was only allowed to transfer whole shares).

Otherwise, it’s been only small OCPs here and there… always less than $200, except for one contribution of ~$785.  My last OCP was in 2012.  Thus, the reinvested dividends have been doing the majority of the work.

The net investment into PEP over the years has been $1,985.05.  This is not my cost basis though, as this net investment does not include reinvested dividends.  Reinvested dividends have been $2,096.58.  Thus, I’ve had a 105.62% payback of my net investment!

Meanwhile, the current value is $9,969.18.

The annualized total return ends up being 9.23%, covering my initial purchase on 3/5/1997, all the way through 12/8/2017.

As with PG, RPM & AFL, my investment timeframe for PEP includes two significant bear markets.

 

Summary

PEP’s price performance this year has been a little behind that of the market, but certainly nothing to complain about.  Also, I can’t argue with the long-term track record.

My 9.23% annualized return for PEP is right in my desired target return range of 9% to 11% for a company of its size.

Unfortunately, this performance is the lowest of the reported 9.41%, 10.79% and 12.73% returns for my Procter & Gamble (PG), RPM International (RPM), and Aflac (AFL) positions that I reviewed in my previous three performance checks.

Bringing the returns of PG, RPM & AFL up-to-date allows for the following comparison.  As you can see, due to recent price changes since each individual review, PEP no longer has the lowest annualized return.

This is the 4th of at least 5 performance checks I have planned, with the next being a check of Johnson & Johnson (JNJ).  Let me know if you have any questions about what you see in the spreadsheet snips.

Do you have similar performance checks for stocks in your portfolio?  If so, please share some of your annualized return numbers!  Let me know what criteria you have for acceptable performance.