Source: PaxForex Premium Analytics Portal, Fundamental Insight
Coca-Cola stock is up 6.3% in the first half of 2022, according to S&P Global Market Intelligence, as the beverage maker is handling the inflation-ridden market with skill. By comparison, the S&P 500 index fell 20.5%, finding itself in a bear market.
Not like other consumer goods companies, the strength of Coca-Cola's brand value has allowed the beverage's owner to increase prices to counteract its costs without much damage to sales.
CEO James Quincy told analysts during Coke's Q1 earnings conference call in April that "trying to catch up on prices in a recession is very difficult, so we're inclined to take action."
In some markets, such as Latin America, where Coca-Cola is far and away the dominant supplier of soft drinks, its pricing actions do not always immediately follow those of its competitors, so it may cede some market share in the process. However, competitors can only profit until they are forced to raise prices, at which time Coca-Cola protects its margins.
Although Coca-Cola is currently outperforming the broad market index, for too long the company's stock has been far behind. During the past ten years, Coca-Cola's total return has been 122% or half of the market's 245% return, and that includes the S&P 500's current loss of a fifth of its value this year.
At the end of 2021, the gap was more than 3 to 1.
Still, one of the main reasons investors are buying Coca-Cola stock is its dividend, which currently yields 2.8% annually. In addition, Big Red has unfailingly increased its payout every year for more than 60 years, making it the " Dividend King," the rare group of stocks that has raised its dividend every year for 50 years or more.
That's not necessarily a bad investment idea. A few years ago, J.P. Morgan Asset Management found that stocks that first raised and then raised their payouts over a 40-year period from 1972 to 2012 yielded an average annual rate of 9.5%, compared to 1.6% for stocks that did not pay a dividend.
Beyond dividends, the company's investors can enjoy how its business is changing: sales are up, margins are up, and free cash flow is up. That trinity helped Coca-Cola's stock rise in the first half of the year.
As long as the price is above the 62.50 level, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 62.84
- Take Profit 1: 64.00
- Take Profit 2: 66.00
Alternative scenario:
If the level of 62.50 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 62.50
- Take Profit 1: 61.00
- Take Profit 2: 59.60
