Pop star PepsiCo is showing signs of a turnaround. The world's second largest soft-drink maker behind Coca-Cola came out swinging last week, when it released quarterly results that beat analysts' estimates. The upbeat earnings announcement was a pleasant surprise given Pepsi's weak market position nearly a year ago.

Let's evaluate why this may be the year PepsiCo breaks ahead of competitors and rewards patient shareholders.

Show me the money
A dividend increase and share buybacks give income investors something to smile about in the year ahead. Specifically, Pepsi plans to return $6.4 billion to shareholders in 2013, through dividends and share repurchases. The company has already used this method to return $50 billion to shareholders since 2002.


In addition to a 17% increase in net revenue during its fourth quarter, Pepsi raised its dividend by 5.6% to $2.27 a share. The stock now boasts a dividend yield just shy of 3%. Best of all, Pepsi is a longtime dividend aristocrat, so shareholders can rest assured that the company's quarterly payout is reliable.

The S&P 500's Dividend Aristocrats Index tracks the performance of the S&P 500's top blue-chip companies, which have consecutively increased dividends for at least 25 years running. Both Pepsi and its rival Coke are longtime dividend aristocrats. Coke has been paying consecutive cash dividends since 1963, and Pepsi since 1965 -- talk about a rich history of rewarding shareholders.

Company

Current Dividend Yield

Years of Consecutive Dividend Increases

Coca-Cola

2.7% 

50 

PepsiCo

2.9% 

48 

Last year marked Pepsi's 40th consecutive annual dividend increase. This is a tradition that stockholders will undoubtedly see continued in the quarters to come.

International growth? Yes, please.
Pepsi continues to push aggressively into high-growth markets such as China and India. Today, the cola and snack giant's products are sold in nearly 200 countries around the globe. Yet the company still has plenty of growth opportunities in emerging markets.

Going forward, Pepsi's investments in China should start to pay off. By the end of 2013, Pepsi will have invested more than $2.5 billion in its food and beverage businesses in China. In fact, a portion of this funding helped Pepsi open a research and development facility in Shanghai just a few months ago.

The new R&D facility is part of the company's ongoing plan to fuel growth in the Chinese market. As the company's largest R&D center outside North America, the new Shanghai outfit will serve as Pepsi's home base for product innovation and operations throughout Asia.

This is important, because the company's ability to customize its brands to better fit local tastes is one of the reasons for Pepsi's wild success in foreign countries. For example, Pepsi's Shanghai location is equipped with test kitchens for developing new flavors and products designed specifically with Asian consumers in mind.

China aside, Pepsi is also finding success in Russia, which is now Pepsi's second biggest market. The good news out of Russia is partially thanks to the company's 2010 acquisition of Russia's leading food and dairy company known as Wimm-Bill-Dann Foods.

In Pepsi's most recent fourth quarter, revenue out of Russia climbed 10%. Meanwhile, the company generated sales growth of 9% overall in emerging markets during the quarter.

Snack on this
Unlike soda competitors such as Coca-Cola or Dr Pepper Snapple Group , Pepsi doesn't rely solely on beverage sales. That's good news for the stock, since soft-drink demand in North America continues to fizzle.

The company's snack business, on the other hand, remains a strong point for Pepsi. In fact, thanks to its Frito-Lay business, Pepsi is the largest snack-food company by market share worldwide. According to Pepsi CEO Indra Nooyi, Pepsi commands "the No. 1 savory category share position in virtually every key region across the globe."

Dominating the snack-food industry is important, because it greatly enhances Pepsi's competitive moat. Moreover, the likelihood that a new competitor could unseat Pepsi's Frito-Lay brands in this segment is slim at best.

Of course, that's not to say that Pepsi's snack business is void of any competition. Kellogg and Kraft Foods represent two of Pepsi's closest rivals in the snack-food space. Kellogg beefed up its snacks portfolio last year, when it purchased the Pringles brand from Procter & Gamble , in a deal valued around $2.7 billion. By adding the popular canned chips to its growing snacks portfolio, Kellogg gained international exposure with Pringles' strong presence in more than 140 countries. In fact, the Pringles deal essentially tripled Kellogg's global snack business -- positioning it as a true competitor to PepsiCo.

Nevertheless, with the global snack-food market set to top $334 billion by 2015, Pepsi is right where it needs to be in terms of its global footprint and brand power.

Bottom line
There are plenty of reasons to get excited about PepsiCo today -- from all-cash dividend payouts and share buybacks, to a promising international strategy, and a snack portfolio that boasts 22 brands that each pull in annual sales of more than $1 billion.

PepsiCo has quenched consumers' thirst for more than a century. But recently, the company has left shareholders craving more. With increased competition and loss of market share, many investors wonder if this global snack food and beverage giant is simply fizzling out. Are more bland results ahead for PepsiCo? In The Motley Fool's brand-new premium report on the company, we guide you through everything you need to know about PepsiCo, including the key opportunities and threats facing the company's future. Simply click here now to claim your copy today.

 

The article 3 Reasons for Investors to Love Pepsi in 2013 originally appeared on Fool.com.

Fool contributor Tamara Rutter has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, PepsiCo, and Procter & Gamble and owns shares of PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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