Dr Pepper Snapple Hikes Dividend & Boosts Share Buyback

Dr Pepper Snapple Group, Inc. DPS recently announced a 10.4% hike in the quarterly dividend apart from an additional share buyback plan.

The beverage maker's board of directors announced a quarterly dividend of 53 cents per share, up from 48 cents paid previously, to be paid on Apr 5, 2016, to shareholders of record as on Mar 15. The new dividend amounts to an annual dividend of $2.12 per share, representing a dividend yield of 2.4%.

The board of directors also authorized an additional share buyback plan of $1 billion, bringing the total current authorization to $5 billion.

Dr Pepper's consistently strong margins have resulted in a stable cash flow position which allows it to regularly return cash to shareholders through dividends and share buybacks. The company has increased its dividends each year including quarterly dividend hikes of 10.4% in 2016, 17% in 2015, around 8% in 2014 and 12% in 2013. Moreover, the company repurchased shares worth $400 million each in 2012, 2013 and 2014 and guided to buy another $500 million to $550 million shares in 2015. Dr Pepper Snapple is slated to report the fourth quarter and full year 2015 results on Feb 17, before the market opens.

Dr Pepper has delivered solid top line and bottom line results in the first three quarters of 2015 on the back of pricing gains, innovations, strong performance on non-carbonated beverages, powerful marketing programs and productivity improvements. Despite increased currency headwinds, the company raised the full-year sales and EPS expectations twice in 2015. Improving U.S. consumer sentiments, rational pricing environment, increased marketing support and RCI driven cost savings will boost results in 2016.

Stocks to Consider

Dr Pepper has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader beverage sector are Primo Water Corporation PRMW, Keurig Green Mountain, Inc. GMCR and Constellation Brands Inc. STZ. All these stocks carry a Zacks Rank #2 (Buy).

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