E Is Keurig Dr. Pepper A Future Dividend Aristocrat?

Dividend growth investors want to know if the stocks they own will continue to raise dividends not just this year or next year, but many years from now. Those investors who plan to live off dividends need to be reasonably assured that their investments will throw off a higher level of income year from now. It is why the Dividend Aristocrats, those companies with at least 25 consecutive years of dividend growth, are so popular amongst dividend growth investors.

Stocks that join this exclusive group often provide a product or service consumers demand even in a recession, have solid growth prospects, and generate the cash flow needed to fund a growing dividend.

With this in mind, this article will look at Keurig Dr. Pepper (KDP), a name held by Eminence Capital, to determine if the stock could one day join the Dividend Aristocrats.

Company Background, Growth Prospects & Dividend Analysis

In 2018, Dr. Pepper Snapple and Keurig Green Mountain completed their $20 billion merger to form Keurig Dr. Pepper. Keurig Dr. Pepper now consists of four reportable business segments Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages. The company’s core brands include Dr. Pepper, Canada Dry, 7UP, Snapple, Bai and Keurig. Keurig Dr. Pepper has a current market capitalization of $42.5 billion and generated revenue in excess of $11 billion last fiscal year.

Keurig Dr. Pepper’s key prospect for growth is that it is the third-largest non-alcoholic beverage company in the country, trailing just the Coca-Cola Company (KO) and PepsiCo, Inc. (PEP). This gives the company a size and scale advantage that few others in its industry can replicate. The company’s carbonated beverages, like Dr. Pepper and Canada Dry, are already market leaders. Keurig Dr. Pepper is also bringing innovative new products within these brands, like Canada Dry Bold, to market.

Additionally, Keurig Dr. Pepper is now a more diversified company due to the merger. Instead of being primarily a carbonated beverage company, Keurig Dr. Pepper now has a significant amount of market share in coffee. The company estimates that its brewing systems have reach a 20% market share with a goal of achieving 30% to 50% market share in the future. This leaves more room to grow despite the sizeable market share in a fragmented business.

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