Pepsi Raises Dividend 7%, Ups Buyback and Restaurants Rise, Boosted By Fast Casual

PepsiCo, the beverage firm, said Monday that it will buy back $15 billion in shares and boost its dividend 7% to $1.92 a share, good for a 2.9% yield. This is the 38th consecutive annual increase.

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“The board’s action reflects continued confidence in the growth of our business and our commitment to providing strong cash returns to our shareholders,” said Indra Nooyi, Pepsi’s chairman and CEO.

The beverage field is consolidating. Last month, PepsiCo won approval from regulators to buy its two biggest bottlers — Pepsi Bottling Group and PepsiAmericas — for $7.8 billion. Chief rival Coca-Cola (KO) is doing the same.

These moves enable the two largest beverage empires to adjust more quickly to consumers’ changing tastes. With the bottlers under their control, they can swap products on the shelves as needed, rather than wait for a bottling company to do so. [Read the full article]

Restaurants, one of the 18 retail industries tracked by IBD, sprinted from deep in the rankings into the top 20 groups over the past three months.

Overall, industry sales and traffic numbers have declined for six straight quarters. But the rate of declines slowed in the fourth quarter.

On the sales side, Cheesecake Factory (CAKE) hasn’t had a positive quarter since Q3 2008. Denny’s (DENN) sales dropped for 12 straight quarters through Q4. Starbucks (SBUX), McDonald’s (MCD) and Bob Evans (BOBE) have all seen four quarters of top-line declines. [Read the full article]

Rosenbaum, who co-manages BlackRock U.S. Opportunities Fund , stays alert for stocks that perform best during the prevailing phase of the market cycle. Going into a downturn, for example, is when momentum stocks — those whose upward movement is driven largely by being popular will get hit hard.

A company that investors expected less from, on the other hand, might survive better because the price wasn’t artificially inflated.

And it’s during downturns that free cash flow is even more important, Rosenbaum says. If that is rising and the company’s industry is healthy, then it’s a good candidate for the fund.

Free cash flow can also increase a company’s chances of reaching its earnings estimates. A credit crunch makes that more important, as there is no room to boost revenue by expanding (via borrowing).

At the end of 2009 the fund was slightly less concentrated than its benchmark in seven of 10 industry groups, which Rosenbaum says is a method of risk control. [Read the full article]

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