What price would an investor pay to own the most recognizable brand in the world? What is the value to the investor to build a dividend portfolio anchored by a company that has paid dividends each and every year since 1893 and increased its payout every year for 50 straight years? These are incredible attributes that belong to the Coca-Cola Company (KO).
Number 1 Brand in the World
Coca-Cola is an iconic brand with world-wide recognition, the number one most recognized brand in the world according to the 2012 Interbrand Report. Interbrand, which is a global consulting firm, publishes its brand value report every year and again this year the report places Coca-Cola ahead of admired and desirable companies such as Apple (AAPL), McDonalds (MCD), Google (GOOG), Microsoft (MSFT), IBM and Disney (DIS), to name a few. Certainly owning the most recognizable brand in the world helps give Coca-Cola a very wide moat, which serves to fend off competition, in the parlance of Warren Buffett. As an indicator of incredible scale, Coca-Cola's patrons consume 1.8 billion servings a day.
In the United States we know Coca-Cola as a beverage company with its familiar brands such as Coca-Cola, Diet Coke, Fanta and Sprite. But the company is so much more! It is a world-wide marketing powerhouse, which owns or licenses and markets more than 500 nonalcoholic beverage brands including waters, enhanced waters, juices and juice drinks, teas and coffees, and energy and sports drinks. The company's beverage products are available through its network of bottling and distribution operations as well as bottling partners, distributors, wholesalers and retailers. The company has established six operating regions across the globe. To get a sense of the scope of the company operations, one can click on a geographic region and note the more than 200 country websites developed by Coca-Cola in local languages.
Coca-Cola goes ex-dividend on 11/28/12 with a pay date of 1/17/13. Coca-Cola has been paying dividends since 1893, which by itself is significant and not matched by many others. But the huge story is the company boasts 50 consecutive years of dividend increases. This is a milestone achieved by only 14 companies out of the universe of publicly traded companies in the United States. No guarantees, but with a 50-year record it is very likely the company will go for 51 consecutive years of dividend increases … then 55 years, then 60 years and so on. This is a jewel of a stock for income-oriented investors because of ever-increasing dividend payments. In 2012 the dividend was increased 8.5%. In addition, the company has a long track record of net share repurchases including 1.3 billion in 2010, 2.9 billion in 2011 and is on track to hit 3.0 billion in 2012.
Coca Cola Company Fast Facts
- 3500 products world-wide and growing
- 15 different brands with annual revenue exceeding 1 billion dollars each
- 200 countries across the globe where products are marketed
- 1,300,000 brand Tweets per quarter
- 50 million Facebook fans
- 14 million coin operated cold drink dispensing units
- More than 20 million locations world-wide sell the product
- Warren Buffett's Berkshire Hathaway, Inc. (BRK.B) is the top shareholder with 400 Million shares
- Most recognized brand in the world
- Committed 30 billion over the next 5 years to support growth in China, India, Russia, and Chile
- 65 million operating cash flow per day
Coca-Cola by the numbers
Trailing P/E ratio
Return on Equity
Price and dividend reflect 2 for 1 stock split in August 2012
Source: Yahoo Finance
The closing price of Coca-Cola was $37.36 on November 26, 2012, which represents a 9% pullback from its 52-week high of over $40 in July 2012. Is this a good entry point? Since we can't predict the future, who knows? But over time the likelihood is the company will continue to grow, continue to expand across the globe, create new products and add bolt-on acquisitions. Coca-Cola represents one of the bluest of the so called "Blue Chip" investments. With a record of 50 years of increasing dividend payments, I view this as an appropriate investment for income-oriented investors including retirees like myself seeking a regular and growing stream of dividend cash.
Disclosure: I am long KO.