Price/Earnings Ratio

PepsiCo Inc. Coca-Cola Co. Industry Average

Dec 31, 2011 15.45 18.27
Dec 29, 2012 18.84 19.00
Dec 28, 2013 17.66 19.54
Dec 27, 2014 22.86 25.87
Dec 26, 2015 25.72 26.01
Dec 31, 2016 24.09 27.48 22-25

Pepsi Companys P/E ratio is exactly at the industry average P/E ratio of 20 to 25 times

bracket (24.09 times). This means that investors are willing to pay 24 times for every dollar of the

companys earnings. Its P/E ratio has decreased by 1.63 times in 2016 because its stock price

increased by 10.44% from 2015. During 2016, Pepsi Co. generates $877 billion more than its profit

available to common stockholders in 2015 but issued shares for only 1.28% less so it resulted to a

decline in P/E ratio. However, when compared to its main competitor (Coca Cola Company), Pepsi

Companys price/earnings is much better. Although Coca Cola have a higher P/E, this does not

mean that higher is always the better. It is because Coca Cola Companys stock price are

overvalued since it surpassed the average bracket. So, when a stock is overvalued, there is a huge

difference between the stocks selling price and its intrinsic value which is expected to drop in

price in the future and potential investors would probably not want to earn less.

Earnings per Share (Diluted)

Earnings per share (Diluted)

2016 2015 2014 2013 2012 2011
PepsiCo Incorporated 4.36 3.67 4.27 4.32 3.92 4.03
Coca Cola Company 5 - - - - -
 Pepsis earnings per share (Diluted) ratio amounts to 4.36 times. This means that for every

issued and outstanding share, shareholders earn 4.36 times which made it capable of generating a

significant dividend for investors and can plow the funds back into its business for more growth.

Pepsi Companys EPS is of high quality because its operating cash flow (7.29 times) exceed its

earnings per share (4.36 times). It also means that the company is generating more cash than what

is reported on the income statement. PepsiCompanys EPS is slightly lower than its competitor,

Coca Cola Company (5 times). It is because many of the countries in which their products are

made, manufactured, distributed and sold have experienced and continue to experience

unfavorable economic conditions, such as recessions or economic slowdowns. Their business or

financial results may be adversely impacted by unfavorable economic conditions in the United

States and globally, including: adverse changes in interest rates, tax laws or tax rates; volatile

commodity markets, including speculative influences; highly-inflationary economies, devaluation,

fluctuation or demonetization and many more.

Dividends per Share and Payout Ratio

PepsiCo Inc. 2016 2015 2014 2013 2012 2011

Dividends per share ($) 2.96 2.76 2.53 2.24 2.13 2.02
Payout Ratio (%) 63.8 80.6 54.1 51.9 54.3 49.8

Coca Cola Co. 2016

Dividends per share ($) 1.4
Payout Ratio (%) 93.6

Pepsi Companys dividends per share for 2016 is 2.96x which is exemplary since it has an

increasing trend for the past six years. It indicates that for every common stock, an investor can
receive a dividend of $2.96 .It is bigger than Coca Cola Companys DPS which is $ 1.4 only. But

investors should always look beyond a stock's yield to determine if it's a good income investment

and whats best to consider is the dividend payout ratio. Since payout ratio represents the

percentage of a company's earnings or free cash flow (FCF) that was spent on dividends over the

past year, the lower the payout ratio, indicates that a company has room to grow its dividend

PepsiCo paid out 63.8% of its earnings and 57.47% of its FCF on dividends during 2016.

Meanwhile, Coca-Cola paid out 93.6% of its earnings and 92% of its FCF on dividends during that

period. PepsiCo's lower payout ratios indicate that it has much more room to raise its dividend

than Coca-Cola.

Dividend yield

Dividend Yield (Average) 2016 2015 2014 2013 2012 2011

PepsiCo Inc. 2.93% 2.88% 2.83% 2.8% 3.17% 1.9%
Coca Cola Co. 3.27% - - - - -

PepsiCo has a lower yield (2.93%) compared to Coca Cola (3.27%) but shows an

increasing trend over the past six (6) years, have a lower payout ratio, have and a more diversified

business models. The researchers believe that investors should accept the PepsiCos lower yield

rate for its long-term growth and stability.