Performance Check – PEP

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.



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.

7 thoughts on “Performance Check – PEP

  1. This is a great series that I really haven’t seen much of elsewhere. Nice choice being just your fourth purchase way back when. PEP and AFL are both high on my watch list. Any reason you haven’t added much since 2012? The payout ratio is a bit higher than what I usually look for but still perfectly in range for a stable, large business like PEP. Really looking forward to JNJ’s write up.

    1. Hey Dozer, really glad you like the series. Looking back, I did do fairly well picking some good stocks back then. I actually had seven stocks I picked back then. The other two were: CenturyTel (CTL), now CenturyLink, which was a good decision to sell a few years ago, and Intel (INTC), which I sold a few years back (since it was one of my worst performers at the time) to use the proceeds for an auto purchase. I had read a book back then called America’s Finest Companies by Bill Staton that really clicked with me and started me down the road of investing in dividend-paying companies.
      As for why I haven’t added much to PEP lately (or any of the other stocks I’ve reviewed in Performance Check recently) it’s because they were easily the largest positions in my portfolio, and I wanted to have a better balance in weight among the holdings. My other holdings are beginning to catch up in weight now, so new purchases will become more of a possibility moving forward.
      Thanks for your comments, DD.

    1. Hi DG, I’m a big fan of Pepsi as well. The additional diversification they have with their snacks is a plus compared to Coke. Thanks for stopping by and commenting!

  2. Hi Engineer,

    good overview of PEP – tx for sharing! – PepsiCo was on my watchlist for a long time, but i made the mistake not to pull the trigger. Finally i purchased some shares in October 2017…i plan my portfolio around some core holdings (about 15) and PepsiCo will be most likely one of them. I think PEP is well diversified and in addition to that the management is adapting to the future with healthier products. – Can’t wait to add shares, if the valuation is ok…


    1. Hi DS, welcome, and thanks for the comment. PEP has certainly been a core holding of mine. I think their prospects are bright as long as they continue to add healthier products to the portfolio, as you said.

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