Seeking Alpha
, YCharts (501 clicks)
Long/short equity, dividend investing, value, deep value
Profile| Send Message|
( followers)  

Coca-Cola (NYSE:KO) has certainly hit a growth headwind over the past two years, amid declining soda consumption in North America and the emerging markets not growing fast enough to make up for that.

KO Revenue (NYSE:<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

KO Revenue (TTM) data by YCharts

During that stretch Coca-Cola stock has failed to keep pace with the market:

KO Total Return Price Chart

KO Total Return Price data by YCharts

But at this juncture in the bull market, Coca-Cola is an interesting rare duck: a global behemoth that will provide relative strength in down markets (see the 2008-09 sell-off and the 2011 slide) and currently trades at (for it) a not-high valuation that isn't much different than where it landed during the financial crisis.

KO PE Ratio (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

KO PE Ratio (TTM) data by YCharts

While Coca-Cola has hit a growth headwind, we're still talking about a flush operation: KO Free Cash Flow Per Share (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

KO Free Cash Flow Per Share (TTM) data by YCharts

That chunk of free cash flow is a pretty good indicator that Coca-Cola will have no trouble continuing consistent dividend growth that has clocked in at nearly 6x the rate of inflation over the past 10 years.

While the yield for the S&P 500 has fallen from above 2% a year ago to just 1.7% today, Coca-Cola's stalled stock price has created an uncommon opportunity for income investors: a dividend yield above 3%. During the past 10 years a 3%+ yield came only during the big selloff in 2008-2009, which sent all stock yields (among payers that didn't have to cut) rising:

KO Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

KO Dividend Yield (TTM) data by YCharts

Add in the value of stock buybacks and Coca-Cola's shareholder yield is more than 4%. A growth stock it ain't. But for income investors looking for a not-too-pricey stalwart, Coca-Cola's 3% yield and near 80% increase in shareholder payouts over the past five years might be worth some further investment research.

Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine.

Disclosure: None

Source: Coke: Currently Offering A 3% Yield