Coca-Cola, a stable growth icon and dividend leader for investors
Investors usually purchase shares with the expectation that their value will grow along with the company’s growth and profitability. However, shares can also bring other benefits. As companies mature and stabilize their business, they often pay out a portion of their profits to shareholders through dividends. The most attractive companies are those that not only pay dividends but also increase them regularly. Such stocks typically outperform other investment opportunities over the long term.
According to an analysis by Thornburg Investment Management, bond yields fell from nearly 9% to 3.41% between 1990 and 2023. Dividend yields on stocks have seen a similar decline, falling from around 3% to 2.42%. Dividend stocks, however, offer investors a combination of stable income and growth in value over time, which helps stabilize portfolios for long-term investing.
Bloomberg data shows that so-called dividend aristocrats, companies that increase dividends over the long term, have delivered an average annual return of 11.63% between 1990 and 2023, while the broader market has posted a 10.2% return. According to S&P Dow Jones Indices, dividends have contributed to about 32% of total market returns since 1926, while the rest has come from capital growth. The importance of dividends is highlighted by the compounding effect: with dividend reinvestment, the return from 1930 to July 2023 would be 7,219%, while without reinvestment it would be only 214%.
How’s Coca Cola?
Coca-Cola, one of the world’s best-known brands, has increased its stock value by nearly 7% since the beginning of 2024, demonstrating investor confidence. Its strengths lie not only in its legendary brand, which sets the company apart from its competitors, but also in its marketing capabilities, which keep Coca-Cola highly visible and well-known around the world.
In the third quarter of 2024, the company reported sales of nearly $12 billion, which was $290 million more than analysts expected. Operating cash flow was $2.9 billion and free cash flow was $1.6 billion. Adjusted operating margin was 30.7%, indicating high efficiency and profitability.
Coca-Cola is also known for its dividend policy. It has continuously increased its dividend for 62 years, an exceptional performance. The current quarterly dividend is USD 0.485 per share, which corresponds to a yield of 3.03%.
According to Insider Monkey, 69 hedge funds held Coca-Cola stock as of September 30, 2024, up from one in the previous quarter. The total value of those holdings was nearly $35 billion, with Warren Buffett’s Berkshire Hathaway being the largest holder with 400 million shares.
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