PepsiCo's Low Beta Can Add Stability Plus Dividend Growth To Any Portfolio
Geoff Considine, Ph.D | Sep 22, 2021 06:27AM ET
Although shares in PepsiCo (NASDAQ:PEP) have not moved much so far in 2021, with a year to date total return of overview post , including links to the relevant financial literature.
Wall Street Consensus Outlook for PEP
eTrade’s calculation of Wall Street analyst consensus includes the view of 14 ranked analysts who have issued price targets and ratings for PEP within the past 90 days. The consensus rating is bullish and the consensus 12-month price target is 7.7% above the current level. This is very close to the 5- and 10-year dividend growth rates, consistent with the Gordon Growth model. The lowest of the analyst price targets is very close to the current price. Of the 14 analysts included in the consensus, 7 are bullish and 7 are neutral on PEP.
Source: eTrade
Investing.com calculates the almost 18% per year , many investors ignore stocks like PEP.
Over extended periods, an allocation to PEP, a low-beta stock with a 10% expected total return, is likely to increase an equity portfolio’s risk-adjusted return. As a rule of thumb for a buy, I want to see an expected 12-month return that is at least ½ the magnitude of the expected volatility.
Using this metric, PEP is right on the cutoff (expected total return of 10.2% from the analyst consensus and expected volatility of 21%). The portfolio benefits of low beta stocks should count as an additional plus for PEP, however. The market-implied outlook for PEP is mildly bullish, as well. Overall, I am slightly bullish on PEP.
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