Sunday, January 3, 2016

Recent Transfer: Dr Pepper Snapple Group, Inc.

Incorporated in 2007 and headquartered in Plano, Texas, Dr Pepper Snapple Group, Inc. (NYSE:DPS) is one of the largest beverage companies in the Americas. DPS has a diverse portfolio of flavored carbonated soft drinks, including brands such as Dr Pepper, Sunkist, and 7-UP, as well as non-carbonated beverages such as Snapple, Hawaiin Punch and Rose's.

DPS is a Dividend Challenger with a 6-year streak of annual dividend increases. The company pays quarterly dividends of 48¢ per share in the months of January, April, July and October. At the current price of $93.20, the stock yields 2.06%.

DPS is the 13th stock that I'm transferring from my portfolio at Scottrade to DivGro.

Previously, I've transferred the following stocks:

Coca Cola (NYSE:KO)
Toronto-Dominion Bank (NYSE:TD)
Proctor & Gamble (NYSE:PG)
Pfizer (NYSE:PFE)
Kimberly-Clark (NYSE:KMB)
Texas Instruments (NASDAQ:TXN)
Union Pacific (NYSE:UNP)
Dominion Resources (NYSE:D)
Gilead Sciences (NASDAQ:GILD)
W.P. Carey (NYSE:WPC)
Reynolds American (NYSE:RAI)

In the process, I've added $1,595.04 in past dividends to DivGro's total dividend tally and $1,097.17 to DivGro's projected annual dividend income.

    2014-03-25 Bought: 38 shares of DPS at $52.74 per share:$2,004.28
2014-07-03 Dividend on 38 shares at 41¢ per share: $15.58
2014-10-03 Dividend on 38 shares at 41¢ per share: $15.58
2015-01-07 Dividend on 38 shares at 41¢ per share: $15.58
2015-04-07 Dividend on 38 shares at 48¢ per share: $18.24
2015-07-07 Dividend on 38 shares at 48¢ per share: $18.24
2015-10-02 Dividend on 38 shares at 48¢ per share: $18.24
2015-11-16 Bought: 32 shares of DPS at $87.08 per share: $2,786.52
 Total Capital Invested $4,790.80

Total Dividends Received:$101.46

With this transfer, DivGro's projected annual dividend income increases by $134.40.

The following chart shows a 2-year history of DPS's share priceand indicates when I bought shares. So far, DPS has performed quite well for me. My investment is up by 38%, or 47% annualized.

Source: Scottrade

Why DPS?

Here are some reasons I like DPS and why I decided to transfer the shares to DivGro:
  1. While the stock yields a modest 2.06%, the stock's performance has been stellar in the past 24 months. Dividend growth is solid and steady (5-year DGR is 18%).
  2. DPS is in a good position to continue buying back shares. The company has already spent $404 million on share buybacks. At the current price, DPS can buy back 5 million shares per year and reduce the outstanding share count by 2.5% per year. This would allow the company to increase its dividend by the same amount without having to fork over more cash in the process.
  3. The most recent earnings report shows surprisingly strong numbers in key areas. Adjusted free cash will likely come in around $825 million for the current financial year. 
  4. The company is growing fast in Mexico and Latin America. 
  5. DPS faces lower reinvestment needs than peers due to a more limited geographic exposure. As a result, the company enjoys higher free cash flow as a percentage of net income.
Thanks for reading! Please share your thoughts on DPS as a dividend growth stock below.

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