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Dividend Stock Analysis Dr. Pepper Snapple Group

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dr-pepper-logoI have been an investor in Dr. Pepper Snapple Group (NYSE: DPS) ever since it spun off from its former parent company Cadbury Schweppes in 2008. It is an excellent company with a good dividend that, not only continues to increase its dividend, but is poised to see a run in its share price as well. It is a good dividend stock that should be added to your watch list.

Here are a few reasons why I like Dr. Pepper Snapple Group shares.

Dr. Pepper Offers A Good Dividend Yield

With returns on Treasuries, money markets, and certificates of deposit still at some of the lowest levels seen in a generation, investors continue to be on the hunt for yield. At current share price levels, Dr. Pepper Snapple Group’s current annual dividend of $1.52 per share provides a dividend yield of 3.33%. Stocks like Dr. Pepper that offer over a 3% annual dividend yield provide investors with a high yield that dividend investors are looking for.

Dr. Pepper Continues To Increase Its Dividend

Dr. Pepper Snapple Group spun off and became a publically traded company in 2008. In 2009, the company started issuing a dividend, and that dividend has increased every year since 2009. The dividend has more than doubling in 4 years, which equates to over an 18% increase to the dividend annually.

Potential Reasons For Dr. Pepper’s Share Increasing

DPS Has A Low P/E Ratio

Dr. Pepper Snapple Group has a Price to Earnings (P/E) Ratio of just 15.2 with its current share price of $45.64. This P/E Ratio is well below its industry rivals Coca-Cola (NYSE: KO) and Pepsi Co. (NYSE: PEP). Currently, both Coke and Pepsi enjoy a P/E Ratio of 21.

If Dr. Pepper had Coke’s P/E Ratio of 21, its shares would be valued at $63 per share. That is over 34% that the share price could rise based on its current valuations.

Dr. Pepper Should Go International

Currently, Dr. Pepper has next to no international exposure. While this can be a blessing because it has missed the European and emerging market struggles as of late, it is also a missed opportunity. Increasing their international offerings would help the brand grow revenue to match their dividend growth.

Dr. Pepper Has A Stable Of Brands

Dr. Pepper reminds me a Billy Joel. When I was a kid, I’d hear all these great songs that sounded like completely different categories: blues, rock, ballads. I thought that there was no way that these great songs could be sung by the same man. You forget how many different songs are in Billy Joel’s enormous catalog. Dr. Pepper is the same way.

You forget how many great brands Dr. Pepper Snapple Group owns. They are the parent company behind some of the biggest beverage names that we have grown up with and love. DPS owns such iconic brands like Mott’s apple juice, A&W Root Beer, Country Time, Crush, Clamato, RC Cola, Hawaiian Punch, and the list goes on and on.

There is more to just dividend yield and dividend growth with this great company. Dr. Pepper Snapple Group continue to be poised for growth in shareholder value.

What do you think about Dr. Pepper Snapple Group’s long-term potential for dividend and share price increases? Is P/E Ratio a good metric to use? I’d love to hear your thoughts in the comment section below.

Note: I am currently a shareholder of DPS, and I plan to continue buying more shares every month through dollar cost averaging.

3 Comments

  1. I really like the strong portfolio of brands as well as the strong financials that DPS has. Although the stock hasn’t been around long DPS has the makings of another great dividend stock.

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