Dr Pepper Snapple Group: Is A 2.4% Dividend Yield Supported By Current Valuation?

Dr Pepper Snapple Group (DPS) has built its business by buying companies, adding brands like Canada Dry, Seven Up, Mott’s, A&W and so on. Today the company has a strong portfolio of flavored carbonated soft drinks and non carbonated beverages and holds the number three position in the North American liquid refreshment beverage segment.
“According to IRi retail sales, we are the #1 flavored CSD company in the U.S. Our largest brand, Dr Pepper, is the #2 flavored CSD in the U.S. and our Snapple brand is a leading ready-to-drink tea. Overall, in 2016, approximately 83% of our volume was generated by brands that hold either the #1 or #2 position in their category. “ - 2016 Annual Report
Of course, this is not the best time to be in the carbonated beverage business, as consumption in the soda segment has fallen for 12 straight years. More than 80% of Dr. Pepper Snapple’s volume is from the Carbonated Soft Drinks segment, while Non Carbonated Beverages account for just 18%.

According to the company, Dr Pepper Snapple held 21.2% share of the US Carbonated Soft Drinks market, but despite rising health concerns, and general perception about carbonated drinks falling into the negative category, Dr. Pepper Snapple somehow managed to escape the fate of dwindling sales experienced by Coca-Cola (KO) and PepsiCo (PEP) in North America.
There are a couple of reasons why this happened. One is the fact that awareness around Coke and Pepsi brands... Read more

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