Dr Pepper Snapple Group (DPS) raises dividend by 9% and has a low risk profile.

Dr Pepper Snapple Group’s (NYSE:DPS) dividend was increased by a solid 9%.  Its overall yield is 2.49%. The firm started paying a dividend in 2010.

Dr Pepper Snapple is a bottling firm and distributor of beverages. Most of its sales come from the North American region. Its brands include the iconic Dr Pepper along with 7UP, RC Cola, A&W and Canada Dry.  For non-carbonated brands, it produces and markets Snapple and Hawaiian Punch.  The company is based in Plano, Texas.

Dr Pepper Snapple Group has maintained a solid three-year growth rate of dividends of 12.2 percent. Dr Pepper Snapple Group currently ranks 3rd in dividend yield within the large cap consumer goods, soft drink beverages category. The quarterly dividend for the April payment will be $0.58 versus the prior year rate of $0.53 per share. Dr Pepper Snapple Group is a member  of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on April 5, 2017, to shareholders of record at close of business on March 14, 2017. Dr Pepper Snapple Group, Inc. is currently priced at $93.56. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
3/14/2017 0.58
12/9/2016 0.53
9/9/2016 0.53
6/10/2016 0.53
3/11/2016 0.53
12/10/2015 0.48
9/10/2015 0.48
6/11/2015 0.48
3/12/2015 0.48
12/11/2014 0.41
9/11/2014 0.41
6/12/2014 0.41
3/13/2014 0.41
12/12/2013 0.38
9/12/2013 0.38
6/13/2013 0.38
3/13/2013 0.38
12/13/2012 0.34
9/13/2012 0.34
6/14/2012 0.34
3/15/2012 0.34
12/15/2011 0.32
9/15/2011 0.32
6/16/2011 0.32
3/17/2011 0.25
12/16/2010 0.25
9/16/2010 0.25
6/17/2010 0.25
3/18/2010 0.15

Analysis of Dr Pepper Snapple Group is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 2.49% 217
Dividend Growth (3-7 year avg) 13.4% 158
Forward P/E 19.83 196
S&P Financial Rating BBB+ 160
Beta 0.75 75
Total Score 806
% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr low Yield % 5 yr max Yield %
2.49% 12.2% 14.7% 35.9 2.60 0.70 2.90 2.00% 3.39%

Positives;

  • Dr Pepper Snapple Group’s dividend yield is above that of the S&P 500 Index.
  • Dr Pepper Snapple Group has paid out a dividend consecutively for the past 7 years.
  • Dr Pepper Snapple Group maintains an investment grade rating of BBB+.
  • Dr Pepper Snapple Group has maintained a three-year growth rate of dividends of 12.2 percent.
  • Dr Pepper Snapple Group maintains a beta of 0.75, lower than the average company.

Negatives;

  • Dr Pepper Snapple Group’ current dividend yield (2.49%) is below its five-year average historical dividend yield.

Latest Earnings & Analysis:

Dr Pepper Snapple Group issued its earnings data on October 27th. The company reported $1.17 EPS for the quarter, missing the consensus estimate of $1.11 by $0.06.  Earnings increased 4% from calendar year 2015. For the full year 2016, earnings were $4.39 per share, up 9% on a year-over-year basis. Revenue came in at $1.5 billion, about in line with most analyst estimates.   For the year, the firm produced a gain of 2.1% from last year’s numbers. This was primarily due to price increases as well as a strong product mix. Overall currency effect was near -1%.  For 2016, Dr. Pepper Snapple Group produced $6.4 billion in revenue. This was higher than the $6.2 billion earned in 2015.  Beverage Concentrates drove growth for the quarter, rising by over 4% year over year.  The packaged beverage unit growth was just over 2%.  Sales within the U.S. and Canada were flat while Mexico provides strong growth (+5%) and the Caribbean area sales rose by nearly 4%.  For 2017, Dr Pepper Snapple projected earnings per share to be in the range of $4.44 to $4.54.  This was below most Wall Street estimates.

Dr Pepper Snapple maintains solid status among carbonated beverage companies. Its primary brands such as Dr Pepper and 7UP are tops in their respective category. The firm has streamlined operations since splitting from Cadbury Schweppes in 2008. It maintains one of the highest profitability within the industry. Unfortunately, the firm is boxed in as its major products are sold by other vendors outside the U.S.  This limits expansion, although its Mexican and Caribbean locations continue to grow briskly. Overall, though the trend is soda consumption is slowly eroding. Overall sales of carbonated soft drinks dropped for the 11th consecutive year in the U.S. in 2016 according to Beverage Digest. In fact, the annual per capital consumption is now back to where it was in 1985.

Cash for the firm was $1.7 billion at the end of 2016. The firm’s credit rating is investment grade at BBB+, on the lower end.  Long term debt comes in at nearly $5 billion. But with a steady cash flow, the firm should have no problem meetings its interest payments. Free cash flow  was $759 million in 2016.  Overall the firm is a solid selection within the beverage industry, just behind Pepsi. It has a strong dividend growth rate of 13% over the past three years and maintains a very low beta of 0.75   Low volatility stocks with impressive dividend growth are hard to find in today’s environment. Although the stock trades at an elevated P/E ratio, we feel the firm has enough merits to quality as a Top 100 Dividend Stock.

Based on the firm’s consistent dividend growth history, investment grade rating and low beta, Dr Pepper Snapple Group, Inc. qualifies as one of our Top 100 Dividend Stocks

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Dr Pepper Snapple Group, Inc. Dividend Yield Historical Chart (Click to enlarge)

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Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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