Many investors view Coca-Cola (NYSE: KO) as a dividend model. The corporation is a Dividend King, having grown shareholder payouts annually for at least 50 years. This streak spans an incredible 62 years.
Coca-Cola management knows the dividend is a huge draw. That may have contributed to its February payout increase of 5% or more. Let's examine that rise to see if the company is a flat investment or still worth buying.
A bubbly drink and business Coca-Cola is best known for its soda, but it's actually a collection of drink brands. Many customers and investors don't understand that Coke also owns Minute Maid orange juice, Schweppes soft drinks and mixers, and Powerade sports beverages. Costa Coffee is nearly as popular as Starbucks in some European cities.
Coca-Cola proudly boasts over 200 drink brands, more than any other company. That distinguishes it from its archrival, PepsiCo, which sells beverages and snacks. Coca-Cola's 800-pound gorilla is Coke. That wide range of drinks allows it to push a popular beverage category or a hot product to boost its fundamentals.
If it needs a boost to the basics, Coke can raise its prices as consumers worldwide enjoy it. Despite its size and maturity, Coca-Cola normally grows with these assets. Revenue climbed by over $46 billion last year, up 6% from 2022 and 40% from 2020.
Profitability has fluctuated but is usually strong. This disciplined company sells a popular, cheap-to-make good. Its approximately $46 billion in revenue in 2023 yielded $10.7 billion in headline net income, a sweet margin of over 23%. Over the past five years, Coca-Cola's net margin has ranged from 22% to 25%.
Company free cash flow (FCF) is stunning. With revenue just shy of $10 billion in the past two years, it's not a major concern that it's not rising as fast. That covers the dividend, which cost the corporation $8 billion in 2023.
Is it worth buying? Of course, stocks trade more on future potential and prices than past performance. Analysts expect Coca-Cola's growth to slow this year. With a nearly 5% top line increase predicted for 2025, things should improve. Given the consensus forecast for 2024 per-share net income growth of 4% and nearly 7% in 2025, profitability seems better.
Since Coca-Cola expects single-digit growth, its projected P/E of roughly 24 may look high. Yet we must also consider that dividend, which the corporation is unlikely to stop boosting and presently yields 3.2%, significantly above the S&P 500 index's average. I recommend this stock for buy-and-hold investors. I don't see this company losing money, and its cash flow should keep it as Dividend King for a while. As a Coca-Cola bull for years, I don't see that changing.
stay turned for development