Portfolio Manager David Abella of City National Rochdale is encouraged by Dr Pepper Snapple Group Inc.’s (DPS) efforts to turn around sales in canned soda, as well as the company’s attractive valuation and dividend.
“The company has big exposure to canned soda obviously, and that market is a bit weak right now in terms of its growth. But we feel Dr Pepper Snapple has a great franchise and attractive valuation of 15.5 times earnings, a nice dividend yield of 3.1%, and it’s growing in the low single digits,” Abella said.
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Dr Pepper Snapple Group is trying to get to the next level by introducing products such as Dr Pepper TEN, which has just two grams of sugar, Abella said. He believes the company is being more proactive than its competitors The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP).
“They are making a very strong effort to reformulate their beverages to appeal to today’s consumer wants, which is less sugar but satisfying taste,” Abella said. “We’re encouraged that they are trying to turn around the flat sales in canned soda. But meanwhile, we think there is a very steady franchise that can support the current dividend.”
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