PepsiCo & Hormel Foods: Ideal Addition to the Inflation Depository?

PepsiCo (WKN: 851995) and Hormel foods (WKN: 850875) are business oriented good additions to any inflation portfolio. The respective complete packages are known for strong brands in food and beverages. This provides pricing and can enable moderate growth. Defensive class and quality go hand in hand.

Still, PepsiCo and Hormel Foods are two stocks where the quality is the highest. In any case, the reviews are not bargains. So let’s take a closer look at it.

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PepsiCo: Good addition to the inflation deposit?!

PepsiCo is a very solid, high-quality stock when it comes to the inflation portfolio. 21 (or is it already 22?) brands have annual sales of more than one billion US dollars. It is therefore a broad and at the same time strong portfolio on which the pricing power is based here.

This resulted in a 33% year-on-year growth in earnings per share in the first three quarters of the financial year 2022. A really high value has been reached of over 6 US dollars. The dividend per share and quarter of US$1.15 is therefore still very well covered.

However, PepsiCo’s valuation is anything but cheap. The 2.5% yield alone underlines this very clearly. With a price-to-earnings ratio of around 22.5 based on the figures for the first three quarters, we see a somewhat more moderate valuation. Nevertheless: The potential for a passive income is relatively low. What we therefore continue to need is consistent growth. Perhaps accompanied by exercising pricing power.

Hormel Foods: What’s the thesis here?

Hormel Foods stock also offers a qualitatively similar mix. Ultimately, here is a portfolio that includes 40 of the leading consumer brands in their respective product categories. Quality and quantity that enable the pricing power is a given. Very strong brands such as SPAM breakfast meat also belong to the American group.

Hormel Foods has not yet been able to properly utilize its own pricing power. In the third quarter, management delivered just 3% earnings growth on an adjusted basis. Nevertheless, this can of course continue to offset cost inflation. Revenue was up 6% year over year, which is a bit more solid.

However, the price at Hormel Foods is also the big question mark. Currently, the dividend yield is 2.2 per cent. It also has a price-to-earnings ratio of around 26. Dividend King may need a little more growth to justify its current valuation.

Business oriented interesting!

Both Hormel Foods and PepsiCo are two interesting stocks for an inflation portfolio from a corporate perspective. However, the reviews are not cheap. I have both names on my watch list for purchases or additional purchases. However, I will wait a bit until the assessment is cheaper.

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Vincent owns shares in Hormel Foods and PepsiCo. The Motley Fool does not own any of the stocks listed.

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