PepsiCo lifted revenue and its dividend, yet the stock is still falling. The snag is called America

PepsiCo $PEP has wrapped up its second quarter and the numbers look healthy at first glance. Revenue grew 6.4% to 24.2 billion dollars and beat market estimates, as Yahoo Finance summarizes. However, core earnings per share landed at $2.20, a single cent below what analysts expected. And the market punished precisely that detail—the stock lost about 4% after the results.

It’s interesting where the company is thriving and where it isn’t. International markets were the drivers: food in Latin America added 15%, Asia and the Pacific 12%, and the Europe and Middle East region 10%. Domestic America, on the other hand, is a drag—North American beverage volumes dropped 4% and the food division slumped 2%. The operating margin shrank due to weaker pricing.

For dividend investors, Pepsi remains a classic. The company announced its 54th consecutive dividend increase, plus a new 10-billion-dollar share buyback program, stockanalysis.com confirms. The dividend yield sits around 3.95%, which is above average for a blue chip.

But here’s a reason to pay attention. The payout ratio has climbed to roughly 89% of earnings, as data from Yahoo Finance show, well above the long-term average. That means Pepsi is distributing nearly everything it earns, and the room for further brisk dividend hikes is shrinking markedly. If the domestic business doesn’t pick up and earnings don’t accelerate, defending each next record payout will become increasingly difficult.

PepsiCo is increasingly an international story. While the world eagerly reaches for its chips and drinks, at home it’s bumping into a more cautious consumer. Management nonetheless reaffirmed the full-year revenue growth outlook of 2% to 4%.

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