Source: PaxForex Premium Analytics Portal, Fundamental Insight
Whether or not you're a regular consumer of Coca-Cola, have you considered being a shareholder? If not, here's a breakdown of the top four reasons (in no specific order) that might prompt you to become one sooner rather than later.
- Unparalleled Dividend Pedigree
While the stock's forward-looking dividend yield of 3.2% may not be staggering, its consistency is noteworthy. Coca-Cola boasts an impressive track record of paying dividends consistently for decades. More impressively, the company has increased its dividend payout every year for the past 61 years. This trend seems likely to continue, suggesting a reliable stream of dividend increases.
It's essential to look beyond the current yield. Coca-Cola's dividends have experienced substantial growth, approximately doubling since 2015 and quadrupling over the past 15 years. These robust increases significantly outpace inflation over the same period.
- Ingenious Business Model
The significance of a robust dividend lies in its sustainability, and this is an aspect where Coca-Cola excels. The company has strategically crafted and continually refined its business model to generate cash effectively across all economic environments.
While consumers may perceive Coca-Cola as primarily a beverage company, it operates as more than just a bottling entity. In reality, Coca-Cola functions as a licensor of brand names and flavors, earning royalties on the products manufactured by bottlers and subsequently distributed. Its primary role revolves around marketing and advertising its products, resulting in comparatively lower revenue but a more substantial bottom line. This is because the royalty business boasts higher margins than the bottling aspect.
Additionally, Coca-Cola's business model offers consistent and predictable revenue, with bottlers assuming the majority of risks and the burden of rising costs, a trend observed since 2022.
- Formidable Brands and Exceptional Branding
Coca-Cola's strength lies not only in its products but also in its exceptional marketing and branding prowess. Describing the company's advertising efforts as mere marketing doesn't do justice to its skill in creating powerful brands that become integral parts of consumers' lifestyles.
An enduring example is the iconic "I'd Like to Teach the World to Sing" jingle, which remains etched in the memories of consumers more than 50 years after its first airing in Coca-Cola television commercials.
Beyond its flagship cola, Coca-Cola boasts a diverse portfolio of beverage brands, including Fresca, Gold Peak tea, Minute Maid juice, Dasani water, and Powerade sports drinks, among others. While these brands may not rival the prominence of Coca-Cola, the company has successfully replicated its success with diverse products using similar effective promotional strategies.
As an additional benefit, Coca-Cola's extensive product range not only provides leverage for its salespeople with retailers but also offers the company a diverse array of products to promote to a broader audience, catering to consumers steering away from sugary sodas.
- Attractively Valued Stock
Last but certainly not least, consider seizing an opportunity to invest in Coca-Cola as its stock is presently attractively priced.
Trading at just over 20 times both its trailing and projected per-share profits, some investors might debate the affordability of the stock. However, this valuation has been a persistent trend, and the market consistently supports this premium, recognizing the necessity of paying for quality - a sentiment particularly embraced by seasoned investors.
In fact, the current valuation might be more than justified. Despite Coca-Cola's sustained growth in revenue and earnings, the stock is currently trading at a level comparable to early 2020 when the world grappled with the onset of the pandemic. Since then, the investment landscape has favored growth stocks over value stocks like Coca-Cola.
As the economic landscape undergoes changes, there's a shift that could favor value over growth once again. It wouldn't be surprising to witness this particular stock breaking free from its previous stagnation and gaining momentum in the year 2024.
As long as the price is above 57.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 58.42
- Take Profit 1: 60.00
- Take Profit 2: 63.00
Alternative scenario:
If the level of 57.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 57.00
- Take Profit 1: 55.00
- Take Profit 2: 53.00
