Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Coca-Cola Stock: Dividend Growth Prospects Shrinking

Stock MarketsSep 14, 2021 05:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Coca-Cola Stock: Dividend Growth Prospects Shrinking

The Coca-Cola Company (NYSE:KO) is the world's largest nonalcoholic beverage corporation.

Its beverage sales extend to more than 200 countries, and include sparkling soft drinks, water, sports drinks, juice, dairy, and even plant-based beverages.

The company has pushed into the tea and coffee space lately, with its 2019 acquisition of Costa Coffee. Expansion efforts also included Coke's energy drink, which was supposed to compete with Monster Beverage (NASDAQ:MNST), as well as Red Bull.

Th energy drink endeavor was unsuccessful, with the company discontinuing the drink, though it hardly affected the beverage behemoth.

Because of its global presence, and diversified portfolio of iconic brands, Coca-Cola enjoys stable cash flows, which in turn have translated to quite consistent returns over the years.

Investors often praise the company's prolonged shareholder capital return history, featuring 59 years of consecutive annual dividend increases. Coca-Cola, therefore, boasts the title of Dividend Aristocrat.

For this reason, income-oriented investors have historically enjoyed Coca-Cola's reliable dividends. With the stock currently yielding around 3%, an above-average yield in the current ultra-low yield environment, Coca-Cola should continue to be rather attractive for conservative investors looking for low volatility and predictable total returns.

That being said, due to its limited growth prospects in terms of future income and dividends, I am neutral on the stock. (See KO stock charts on TipRanks)

Stable Business, Limited Growth Ahead

As mentioned, Coca-Cola's global presence and diversified brand portfolio ensure multiple streams of cash flows.

Further, due to beverages being a consumer staple, the company's sales have historically been unaffected by recessions. Coca-Cola has not posted a single unprofitable year since at least 1978, which is utterly impressive.

Hence, management has been able to dependably grow the dividend for decades.

However, Coca-Cola's bottom-line stagnation and limited growth prospects are rather worrying. The company produces the same net income levels it did more than 10 years ago. Stock buybacks have certainly helped boost the per-share net income over the years, though not adequately.

As the company keeps raising its dividend year after year, while earnings remain stale, the payout ratio has reached worrying levels, now approaching 90%.

Dividends per share used to grow in the double digits prior to 2008, and in the mid-to-high single digits up until 2018, while the company's latest hike was as low as 2.4%.

Does this mean Coca-Cola's dividend is in danger?

Not really. The company could easily cut on speculative expansion expenses, slightly increase the prices in some of its beverages, and perform loads of financial engineering before discussions on the dividend's safety are to even begin.

Still, as clearly displayed by the dividend hike deceleration, there are little to no prospects when it comes to Coca-Cola growing its capital returns.

Wall Street’s Take

Turning to Wall Street, Coca-Cola has a Moderate Buy consensus rating, based on nine Buys, six Holds, and zero Sells assigned in the past three months. At $62.13, the average KO price target implies 11.6% upside potential.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Coca-Cola Stock: Dividend Growth Prospects Shrinking
 

Related Articles

Israel stocks lower at close of trade; TA 35 down 0.30%
Israel stocks lower at close of trade; TA 35 down 0.30% By Investing.com - Sep 19, 2021

Investing.com – Israel stocks were lower after the close on Sunday, as losses in the Banking, Technology and Financials sectors led shares lower. At the close in Tel Aviv, the TA...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email