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PepsiCo responds to investors with increased share buybacks, dividends

PepsiCo responds to investors with increased share buybacks, dividends

PepsiCo Inc. said Wednesday it would buy back more shares and increase dividend payouts, a move to boost shareholder returns after investors had pressed the company to be more aggressive with its cash.
Goldman Sachs analyst Judy Hong said the company's announcement "should help to mollify investors that have been agitating for more aggressive use of the balance sheet."
Morgan Stanley analyst Bill Pecoriello said the move indicated the company's confidence in its business outlook while maintaining flexibility to make acquisitions.
Chief Executive Indra Nooyi, who assumed the chairwoman title Wednesday, said last week that the company had a "rich acquisition pipeline" and that investors could expect a greater closure rate on deals going forward.
The company announced an increase in its dividend payout target to 50 percent of the prior year's earnings. As a result, the company said it would increase its annual dividend 25 percent to $1.50 (euro1.10) per share, from $1.20 (euro.88) per share, payable on June 29 to shareholders of record as of June 8.
PepsiCo also said it will buy back up to $8 billion (euro5.89 billion) in shares through mid-2010 after its current buyback program is complete. The current $8.5 billion (euro6.26 billion) authorization began in 2006 and has about $6 billion (euro4.42 billion) remaining.
PepsiCo expects about $4.3 billion (euro3.1 billion) in share buybacks in 2007, up form a previous forecast of $3.3 billion (euro2.4 billion), and annual share buybacks of $4 billion (euro2.9 billion) to $5 billion (euro3.7 billion) over the next several years.
PepsiCo's plan should not dilute earnings per share, Hong wrote in a note to investors.
The company's profit rose 38 percent last year to $5.64 billion (euro4.15 billion), or $3.34 (euro2.46) per share. As of March 24, PepsiCo had $8.7 billion (euro6.4 billion) in current assets, including $1.7 billion (euro1.25 billion) in cash and short-term investments.
The company held its annual shareholder meeting Wednesday in Plano, Texas, and shareholders approved a long-term equity incentive plan, which authorizes that 65 million total shares be issued, none of which would be issued as discounted stock options. Under the plan, 20 million shares will be available for SharePower, the company's program to reward non-executive full-time employees.
Shareholders also approved KPMG as the company's auditor and elected eight non-management directors: Dina Dublon, former chief financial officer of JP Morgan Chase & Co.; Victor J. Dzau, chief executive of Duke University Health Systems; Ray L. Hunt, chief executive of Hunt Oil Co.; Alberto Ibarguen, chief executive of the John S. and James L. Knight Foundation; Arthur C. Martinez, former chairman and chief executive of Sears, Roebuck and Co.; Sharon Percy Rockefeller, chief executive of WETA Public Stations; James J. Schiro, chief executive of Zurich Financial Services; and Daniel Vasella, chief executive of Novartis AG.
PepsiCo International chief Mike White also sits on the board.
Ex-chief executive Steve Reinemund, who was CEO for six of his 23 years at the company, retired from the board Wednesday.
Nooyi took over as CEO on Oct. 1.
PepsiCo shares rose 62 cents to close Wednesday at $67.02 on the New York Stock Exchange.
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AP Business Writer Mae Anderson in New York contributed to this report.


Updated : 2021-03-06 07:51 GMT+08:00