Trading212 portfolio- 26/05/20

Weeks summary


Stock picked: PepsiCo

Ticker: PEP

Shares added: 0.04

Total shares owned: 0.09

Dividend yield: 3.14%

Payout ratio: 71%


Amount of dividend:

£0.13

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This weeks stock


Following from this weeks poll it was PepsiCo ticker PEP which came out on top. PepsiCo is one of the front runners in the consumer staple industry, along side companies for example Coca Cola ticker KO and Procter & Gamble ticker PG. This stock is fairly expensive but luckily on Trading212 its fractional allowing us to easily buy into these larger priced stocks. Companies like PEP are great defensive stocks, as we are always buying their products, some of which I will list bellow.


What does PepsiCo make?

As said PEP is a consumer staple, but what does consumer staple mean? The definition of a consumer staple: Essential products that include typical products such as food & beverages, household goods and hygiene products. People tend to demand consumer staples at a relatively constant level, regardless of their price.

Now we know the definition of a consumer staple we can clearly see that PEP is firmly in the consumer staple sector as they make products such as: Pepsi-Cola (their most recognisable product), Quaker, Tropicana, Gatorade, Doritos and many more. The company operated through six segments: Frito-Lay North America, Quaker foods North America, North America Beverages, Latin America, Europe Sub-Saharan Africa, and Asia, Middle East and North Africa.


Fundamentals:

Dividend Yield: 3.14%

Payout ratio: 71%

Profit margin: 10.62%

Return on assets: 8.32%

Return on equity: 52.28%

P/E ratio (price to earnings): 25.27

Adjusted EPS: 5.34

EPS (Earning per share) Growth:

BETA: 1

Cash: $11.25B

Debt: $41.24B

EBITDA: 17.21


Stock breakdown:


PepsiCo is such a large and diverse company covering many consumer items and covers many markets from Europe to Asia and Africa, they have what I like to say fingers in all the pies. But breaking down the fundamentals has a little bit of a different story.


The yield from this stock is very nice sitting at 3.14% but looking at the payout ratio which is 71% above the 60% I tend to like in stocks. Though 71% Is not as high as other stocks in the portfolio, it does mean they cannot grow their dividend a huge amount. This shows that again this is more of a dividend income stock than growth.


Their profit margin of 10.62% is viewed as about average, meaning it's not great but at least PEP has margin in their products. You won’t tend to find a high profit margin on consumer staple stocks so not so concerned with the profit margin.


Now taking a quick look at the P/E ratio which is at 25.27 this shows this stock is over valued and for it we are paying a premium for this stock. Is it bad paying a premium for a stock? Not necessarily the case if the stock is believed they will continue to appreciate in price. Looking at the 1 year chart for this stock shows we missed out on the dip and that PEP made a very quick come back from its lows.


Just taking a look at the 52week lows and highs, the lowest the stock went was $101 and the high being $147. I would wait till the price dips as we are paying a high premium on this stock at the moment. While looking at the price movement of the stock it Is obvious why the BETA is 1 (1 indicates its share price moves with overall market). The other worrying this about this stock is the cash to debt, with only $11B to $41B. They have a lot of debt to the cash they have, but you have to delve deep into how they are managing the debt. Debt isn’t always bad for a company as it allows companies to expand and progress. But I find 4X more debt than cash a little excessive.


Overall I feel PEP is a little to expensive with a high premium on the price, but a good long term stock if you want that dividend income.


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Dividends received

We managed to receive 4 dividend this week from PSEC (now sold) which was £0.13, Realty income paying £0.06, Main Street capital with £0.07 and last with Hormel foods with a £0.04 dividend.


Total dividend (Month): £0.75

Total dividend (6 month): £2.24

Amount for charity (6 month): £0.56


Having 4 dividends in one week was an amazing feeling bringing in a total of £0.30 in one week with some of the amounts getting to nice sized dividends. Once we are getting constant dividends of £0.10 and over this portfolio will start to fly. Now over the £0.50 mark to donate from charity is great, and will be amazing to start the journey of this portfolio to help others in need and try and better the world a little.


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General account summary


This weeks update is that I decided to sell the stock Prospect capital ticker PSEC. The reasoning behind this move was that the stock has consistently lost value over time and on top of that they have cut the dividend like clock work. With the value and the dividend being cut the stock has no place in our portfolio.

Though the monthly dividend will be missed it freed up £15 which was able to buy into other stocks with a better prospect for the future. The portfolio is now making real strides in terms of the dividends being Brough in and I am hoping for the future it will provide a steady cash flow for us to donate to more and more charities.


Today alone (26/05/20) the portfolio had a massive rise in value, going from £304.65 in the morning to £313.41 in the afternoon. Making almost a £10 gain in one day was crazy but not to be expected going forward. Now instead of the portfolio sitting under -10% I am happy that we are now under -5% gain and slowly clawing our way back. Theres still plenty of stocks we are able to average down in in the portfolio so have plenty of time.


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What is:

P/E ratio EPS Payout ratio BETA Dividend



 

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