Shareholders' Equity at Pepsico

Abstract

This case provides instructors with an opportunity to discuss some of the fundamental aspects of a typical public company's shareholders' equity financial reporting and financial disclosures. As such, students are provided with information pertaining to PepsiCo's common stock, preferred stock, stock repurchases, cash dividends, stock splits, and GAAP earnings per share (EPS) versus non-GAAP EPS. In addition, the case also provides an interesting bit of information regarding PepsiCo's 2017 move from the NYSE to the Nasdaq. Excerpt UVA-C-2425 May 28, 2019 Shareholders' Equity at PepsiCo Having just finished her afternoon run, Joan Dunkirk opened a bottle of Aquafina and took a sip to quench her thirst as she sat down to scan the financial news online. She noticed that PepsiCo had released a summary of 2018 results. She skimmed the summary and noted PepsiCo's expectations about dividends and share repurchases for 2019: The Company today announced a 3 percent increase in its annualized dividend per share to $ 3.82 from $ 3.71 per share, effective with the dividend expected to be paid in June 2019. This represents the Company's 47th consecutive annual dividend per share increase….For 2019, the Company expects…total cash returns to shareholders of approximately $ 8 billion, comprised of dividends of approximately $ 5 billion and share repurchases of approximately $ 3 billion. Dunkirk wasn't quite sure why companies would buy back their own stock. She bought stock when it was a good deal, making money on it by either collecting the dividends the company paid and/or holding onto the stock while the stock price increased and then selling it later. But she wasn't sure whether, or how, her logic translated to management's thinking when they decided to buy back a company's stock. . . .