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1 Reason To Avoid Pepsi

Over the last couple months, I’ve shown you stocks to avoid…

Stocks to consider buying…

And some of the best stocks related to the coming Internet of Things…  Which you can find linked further below.

All these recommendations are to help you either avoid pain and terrible stocks.  Or to help you find potentially great stocks to invest in during this pandemic.

If you do both well, it helps you earn higher than average investment returns and build your wealth.

Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.

Today, I want to show you 1 Reason To Avoid Dividend Aristocrat Pepsi so you can continue building your wealth safely.

1 Reason To Avoid Pepsi

It’s Got An Enormous Amount of Debt

Normally in these articles I talk about valuation, profitability, cash flow, the affects coronavirus is having on a company’s financials, and other things.

But frankly none of those matter with PepsiCo (PEP) due to its enormous debt load.

As of this writing, Pepsi is one of the largest food and beverage companies in the world.  And it has a $182.6 billion market cap.

Here’s a brief list of some of the products it owns and sells.

  • Pepsi
  • Mountain Dew
  • Gatorade
  • Doritos
  • Lays

Its most recent quarterly data showed it has $9.1 billion in cash and short-term investments.  While it has $45 billion in short term and long-term debt and capital leases.

Total liabilities make up 86% of its balance sheet.

And its current debt to equity ratio is 3.07.

In other words, its debt makes up 24.6% of its market cap.

And its debt load is 4X higher than its cash levels.

I want to invest in safe stocks that will be around for decades to help me build wealth over the long term.  This helps insure I lose as little money as possible over time.

Typically, this means I invest in companies that have little to no debt compared to their cash and equity.

For example, I look to invest in companies with a debt to equity ratio below 1… And Pepsi’s is 3.07.

While this isn’t as bad as other recent stocks I’ve told you to avoid. Its debt load still makes me uncomfortable enough to where I won’t recommend you buy its stock.

Why?

Because the high debt load combined with the enormous amount of uncertainty with the coronavirus increases the risk in owning Pepsi stock right now… Even though otherwise it’s a great potential investment.

Does any of this mean I think Pepsi will crash and burn?  No.

It will continue performing well over time.  And I don’t expect its shares to crash.

But I still can’t recommend you buy it today due to the risk of its high debt.

For this reason of its large debt load I recommend you stay far away from Pepsi stock to keep your retirement portfolio safe.

Use the following links to some of our recent articles to learn other ways to protect your investments in these uncertain times. 

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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