This week, five of the portfolio holdings ranked in the Top Ten.
| Ticker | Account Value |
| ADP | 4,719.54 |
| HTO | 4,438.08 |
| PEP | 3,165.49 |
| PPG | 3,713.49 |
| SCL | 4,312.56 |
The lowest amount belongs to PEP. We will acquire 2 shares of PEP on Monday morning. Below, is the purchase history and average cost calculation.
Eight months after our last look at PEP, it’s the perfect moment to examine how its recent performance fits into the broader arc of the past seventeen years.
Observations
Stock Price
After reaching an all-time high of 196.88 in May of 2023, PEP’s share price has gone through a rather long and volatile price consolidation. It is approaching support around the $127 level.
It has come back up above that level, but it really wasn’t because of their recent earnings announcement – the price improvement preceded the announcement. Time will tell if the price holds above $117 now or if perhaps, we find a retracement all the way to $100 before finding support.
Earnings
Magnitude/Trend
Clearly, the quarterly earnings remain in a strong, long-term, positive trend as is evinced by the linear, blue dotted line in the chart above. 2026Q2 EPS of $2.20 is a 3.8% improvement over the same period in the prior year. However, it is 3.5% lower than 2024Q2. In fact, 2026H1 is 2.1% lower than 2024H1. Thus, earnings have flattened out a bit. But it is not difficult to see that the stock price has not just flattened but has fallen, and considerably so.
Seasonality
Typically, the quarterly distribution of annual earnings breaks down as follows: 18.3% in Q1, 27.6% in Q2, 29.0% in Q3, and 25.1% in Q4. Remarkably, the variation around these percentages is minimal. The difference between the halves of the calendar year is a bit more pronounced with the first half typically coming in at 45.9% and the second half at 54.1%.
With 2026H1 EPS of $3.81, and the historical average of H1 representing 45.9% of a calendar year’s EPS, it isn’t difficult to see 2024’s record high of $8.16 fall to a new record of $8.30. PEP could very easily see 2026 as their best calendar year ever. BUT! Could the stock be trading even lower by the end of the year? Absoblutely.1
Dividends
PEP is a Dividend King, with an impressive 54-year streak of consecutive dividend increases. The dividend currently yields 4.3%, while the payout ratio remains quite safe at just under 70%.
Interestingly, that 4.3% yield is the highest level seen over the 17-year period shown above. While the payout ratio has steadily increased over that time, it has essentially flattened out over the past seven years. Given PEP’s long track record and the stability of its payout ratio in recent years, I expect the dividend to continue growing safely for the foreseeable future.
Thoughts on Investment
The trailing 12-month P/E ratio is currently 16.30, lower than the average for PEP of 20.79 over the period above.
Whether or not CY2026 will set a record for EPS, there is nothing to suggest PEP won’t keep raising its dividend annually. Furthermore, perhaps PEP’s annual growth rate won’t rival the past, and the stock may deserve a lower multiple. But as low as 16.30? I’m doubtful. And I’m not the only one.
CFRA, GuruFocus, Morningstar, Sure Dividend, and Simply Wall St, have their fair value estimates or 12-month targets falling within a range of $156 to $188.
Simply Wall St. says there are 22 analysts following PEP and that their 12-month target averages out to $155. However, they have a display that shows the range about that average estimate and also how that range and average have tracked over the recent past as well. It makes for a great visual:
Clearly there is more upside potential than downside and we can expect much more than just the dividend trickling in over the next year or so.
- Personally, I would go to the 17:00 mark, but if you’re in a hurry, 17:30. ↩︎