The Best Dividend Growers, Part 10: Coca-Cola Enterprises

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 |  Includes: CCE, DPS, KO, PEP
by: Stan Stafford

Summary

For each S&P 500 industry sector, I will be taking a look at available companies to help determine the best stocks for income investors.

In determining the best stocks per industry for income investors, I will be examining both the dividend growth and dividend yields of the stocks.

Based on impressive dividend growth, low payout ratio, attractive price, and earnings growth, I feel that CCE is the best choice in this group of soft drink stocks.

Overview

In this series of articles, I will be identifying which stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. For Part 10, I will be taking a look at Soft Drink stocks. These stocks include:

  • Coca-Cola (NYSE:KO)
  • Coca-Cola Enterprises (NYSE:CCE)
  • Dr Pepper Snapple Group (NYSE:DPS)
  • Monster Beverage (NASDAQ:MNST)
  • PepsiCo (NYSE:PEP)

Monster Beverage is the only stock in this group that currently does not pay a dividend.

When ranking the dividend-paying stocks by yield, the order is as follows:

  • PepsiCo - 3.03%
  • Coca-Cola - 2.98%
  • Dr Pepper Snapple Group - 2.87%
  • Coca-Cola Enterprises - 2.15%

When ranking them by dividend growth over the past five years, the order is as follows:

  • Coca-Cola Enterprises - 257.10%
  • Dr Pepper Snapple Group - 173.30%
  • Coca-Cola - 48.78%
  • PepsiCo - 45.56%

The dividend growth and yield of each of these stocks is the exact inverse of one another, meaning that PepsiCo (the highest yielding stock) has seen the lowest growth, while Coca-Cola Enterprise (the lowest yielding stock) has seen the highest growth over the past five years.

Looking at the chart below, you can see that PepsiCo has seen the highest revenue growth (with Coca-Cola a close 2nd), while Coca-Cola has seen lowest and is the only stock out of the three to actually see a decline in revenue over this period of time.

KO Revenue (<a href=

KO Revenue (NYSE:TTM) data by YCharts

In terms of earnings, Coca-Cola Enterprises has seen the highest growth, while PepsiCo has seen the lowest.

KO EPS Basic Chart

KO EPS Basic (TTM) data by YCharts

Based on trailing PE ratio, Dr Pepper Snapple Group is the most fairly valued stock, while Coca-Cola is the most overvalued.

KO PE Ratio Chart

KO PE Ratio (TTM) data by YCharts

Looking at forward PE ratios, Coca-Cola still has the highest value, although the difference between it and PepsiCo is less. Coca-Cola Enterprises has the lowest value, although it is nearly identical to that of Dr Pepper Snapple Group.

KO PE Ratio (Forward) Chart

KO PE Ratio (Forward) data by YCharts

None of the stocks have a payout ratio high enough to threaten future dividend growth, but Coca-Cola Enterprises does have the lowest out of the group, which should help the company continue its impressive dividend growth.

KO Payout Ratio Chart

KO Payout Ratio (TTM) data by YCharts

Conclusion

Even though it contains the smallest yield out of the group, I believe that Coca-Cola Enterprises is the best choice for long term income investors. While I believe that all the stocks in this category or solid picks, I believe that Coca-Cola Enterprises' impressive dividend growth, along with its low price makes it the best choice at this moment.

I feel that the company's significant lead in dividend growth over the past five years compared to the other stocks, outweighs its low yield, especially since the difference between it and the top dividend yielding stock is less than 1%. The company has also done a great job of increasing earnings even as revenues have been flat over the past few years.

Through strong marketing campaigns and continued innovation in brand and packaging actions, I feel that revenues will once again rebound in the coming years. And with the company's strong commitment to returning shareholder value through dividend increases and share buybacks, I feel that long term investors will be rewarded handsomely by Coca-Cola Enterprises.

As always, I suggest individual investors perform their own research before making any investment decisions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.