The Board of Directors of PepsiCo (PEP) raised the annual dividend by 7% to $1.92 per share from $1.82 earlier. This is the 38th consecutive annual increase in dividend. The dividend is expected to be payable on June 30, 2010 to shareholders on record as of June 4, 2010.

The company’s strong balance sheet and its ability to generate healthy cash flow allow it to increase shareholder value through higher dividends. Cash in fiscal 2009 totaled $3.9 billion. The improvement was driven by better working capital management. The debt-to-capitalization ratio stood at 30%.

Apart from increasing dividends, PepsiCo uses its financial strength to expand its business. The company continues to invest in product innovation and increased consumer marketing, thereby fueling strong sales for its brands, which offer consumers high quality products at good values.

Apart from this, the company today announced its plans to remove sugary drinks from schools worldwide by 2012. PepsiCo would be the first softdrink maker to do so. Management also stated that the company will only sell water, fat-free milk, and juices with no added sugar in primary schools.

The World Heart Federation has been in discussions with softdrink makers to remove sugary beverages from schools in order to fight the rising problem of child obesity in the U.S.

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