I'm a lot older than I look. Call it what you want: excellent genetics, a good life or just plain good luck. The fact is, this investor hates to admit she's pushing 50.
I am also blessed with a fabulous memory. I can remember events and details in my life from about age 3. So if I tell you that I remember Robert F. Kennedy's assassination, the University of Texas sniper incident, Woodstock and Martin Luther King, don't assume my photo is wrong.
I also remember drinking Coca-Cola (NYSE:KO) with sugar (not that blasted high-fructose corn syrup) and in small bottles - and it wasn't imported from Mexico. My grandparents were Coke loyalists, and down "these parts" (Texas), everything is a "Coke." "What kind of Coke would you like?" "I'd like a Sprite, thank you…."
I was still an impressionable school girl when this commercial aired in 1971. This became a school yard anthem, and I bet you can sing the lyrics even today.
Fast-forward to today. I'm now a bit of a health nut. I rarely drink sodas, so imbibing a sugary Coca-Cola (or even a diet one) is a rare occurrence for me. But Coca-Cola as a stock does make my mouth water. The company has been around since 1886 yet it still has a 5-star S&P rating. More importantly, as a dividend investor, it is a Dividend Champion, maintaining 25+ years of dividend increases.
There's just one problem. I'm "Five Plus Investor," meaning I invest in issues that yield 5% or more. Coca-Cola yields 2.76%. In 2011 I lowered my yield threshold to 4% to accommodate more dividend growth vehicles. But I'm still stymied with how I can invest in Coca-Cola…
Coca-Cola: The Ultimate International Brand
If there truly was a worldwide product, Coca-Cola is it. Coca-Cola company products are consumed 1.7 billion times a day, about 19,400 every second. Coca-Cola became an international company within 10 years of its inception, and in 2012 now distributes its products in over 200 countries.
The mighty task of distributing to the world is not a centralized process. Instead of producing its product from one giant plant in the U.S., Coca-Cola produces the product in local communities worldwide, using locally owned and operated bottling companies. Currently, there are over 275 bottling companies around the world. Most of these bottlers are not owned or controlled by the Coca-Cola company.
These bottling companies range from small family-owned businesses to larger international operations. Most are privately owned. But there is a bit of good news for the investor: some of these bottlers are publically traded.
So, to answer the question I posed in the title: "How to Invest in Coca-Cola for More International Exposure and Bigger Dividends," the answer is: invest in a Coca-Cola bottling company.
Investing in Coca-Cola with Direct International Exposure
While investing in KO provides a one-stop worldwide investment, there is a way to invest more directly in the international growth of Coca-Cola. Go local, and you can participate directly with the bottlers that are responsible for that growth. These bottlers are located on almost every continent on the globe.
There is no way to invest in the family-owned or smaller bottling operations, unless you'd like to fly overseas and buy an ice-cold one. The good news is that plenty of the larger bottling operations are publically traded and available for investment. These are:
- Coca-Cola Hellenic (www.coca-colahellenic.com) is the largest bottler based in Europe. They distribute to over 28 countries, with a large footprint of emerging markets, including Russia, Eastern Europe. They have a small presence in Africa (Nigeria). 2011 was a banner year for Coca-Cola Hellenic, having increased net sales by almost 20%. They are also one of the easiest investments of the bottlers, as they trade on the NYSE, but also offer a slightly higher yielding OTC stock.
- Coca-Cola Icecek (www.cci.com.tr) is the 6th largest Coca-Cola bottler when it comes to sales volume. They operate primarily in the Turkey, Middle East and former Soviet satellite countries. They have experienced compelling growth in the last 7 years in opening up what may be a difficult market for American products. Coca-Cola Icecek trades on the Istanbul stock market as CCOLA.IT, a significant barrier for most U.S. investors, although the all-English user-friendly website makes a significant pitch for it.
- Coca-Cola Enterprises (www.cokecce.com) started operations in the U.S. in the 19th century, expanding into Europe in 1993 by purchasing the bottling rights in the Netherlands. The U.S. bottling side was taken over by corporate, and since 2010 has distributed exclusively in Europe, primarily northern. It is traded on the NYSE and is part of David Fish's Dividend Challengers.
- Coca-Cola FEMSA (http://www.coca-olafemsa.com/kof/index_eng.htm) is the 2nd largest bottler in the world in terms of sales volume, distributing in Mexico, Central America and northern South America. It has more than doubled its sales in its market since 2004, due in no small part to its commitment to providing uniquely Latin American products under the Coca-Cola corporate banner. It is also easily traded on the NYSE and is part of David Fish's Dividend Challengers.
- Coca-Cola Embonor (www.embonor.cl/ - you'll need to translate page) is Chile's 2nd largest Coca-Cola bottler. Information on this company - at least in English - is hard to come by, and it trades on the Chilean exchange. This bottler is experiencing growth thanks to hot weather and stricter drunk driving laws. If interested, it trades as EMBONOA.CI.
- Embotelladora Andina (http://www.koandina.com/index.php#) began operations in Chile in the 1940s and distributes products to Chile, Argentina and Brazil. From 2006 to 2010 its net sales have increased about 50%. I was impressed that while many bottlers only promoted their company and product, Embotelladora Andina was frank about the economic and political risks to their company. They trade on the NYSE in "A" and "B" shares.
- ARCA Continental, f/k/a Embotelladoras ARCA (http://www.arcacontal.com/en/#home-screen_sec), is the 2nd largest bottler for Coca-Cola in Latin America. Headquartered in Monterrey, Mexico, it distributes products in western Mexico, Ecuador and northern Argentina. It also markets its own branded products for Latin American consumers in North America. Arca's stock trades on pink sheets.
- Coca-Cola Amatil (www.ccamatil.com.au) is considered one of the top five Coca-Cola bottlers, operating "down under" in Australia, New Zealand, Fiji, Indonesia and Papau New Guinea. This entity started life as a tobacco company in 1904, expanding into food and soft drinks in 1964. It appears to have recently bought out Coca-Cola Indonesia. Amatil has an impressive history of earnings, profit and dividend increases. The shares (two flavors) trade on the pink sheets.
- Coca-Cola West Company (http://www.ccwest.co.jp/english/) is a conglomerate of 11 distribution companies and 12 bottling companies responsible for the "Coca-Cola System" operating in Japan. Although the management has a fairly aggressive growth target into 2020, the growth is slightly more muted than with emerging markets. There are two shares that trade on the pink sheets.
- Mikuni Coca-Cola Bottling Company has been operating in Japan for almost 50 years. They are one of the smaller bottlers available for investment, with 36 sales bases covering a small geographic area in Japan. There is, however, a compelling dividend growth story with this one. You could be adventurous and trade on Japan's exchange, symbol, 2572.T, but it might be easier to trade these on the German exchange under symbol MKC.GR.
Investing in Coca-Cola for Bigger Dividends
Having detailed what appear to be all the publically-traded Coca-Cola bottling companies in the world, we are now ready to look at dividends. All of these publically-traded entities pay some kind of dividend, and tend to fall into two categories:
- Paying once a year with a variable special dividend
- Paying several times a year; compared with KO, they pay either a higher dividend yield or have a higher dividend growth rate.
The stocks that pay the variable special dividend may act more like growth stocks and don't fit neatly into the dividend growth model. Stocks that have a more frequent payout, however, overall appear to qualify for the dividend growth model. They also typically yield more, or grow their dividends more, than what is offered by the parent company.
Let's see how these bottlers compare to the Coca-Cola parent company (data current as of Friday, April 20, 2012), in the order presented in this article. There are 14 choices to choose from. If the bottler has a better statistic than Coca-Cola stock, that statistic is bolded and italicized.
|Yield to KO?||5-Yr Div Growth||Div
|Coca-Cola FEMSA SA||KOF||1.91%||1x||less||42.20%||more|
|Coca-Cola West Co.||OTCPK:CCOJY||3.00%||2x||more||n/a||n/a|
|Coca-Cola West Co.||OTC:CCOJF||2.75%||2x||same||8.73%||more|
While information is difficult to obtain on some of these entities, what is there in terms of data puts the risk/reward in focus. While there are considerable risks to making any direct international investment - currency issues, political and economic stabilities of the markets served, and lack of market liquidity for the stock - there is a payoff. Looking at the Coca-Cola international bottling stocks available for trade:
- 8 out of 14 provide a higher dividend yield; and,
- 7 out of 14 provide higher dividend growth (5-year)
From a high yield investor's point-of-view, the issues from Coca-Cola Amatil provide the most compelling story. They are the only issues that provide both a higher yield and a higher 5-year dividend growth. Five Plus Investor also takes note of CCLAF.PK, which meets her 5% yield or greater minimum threshold.
The story of Coca-Cola is a classic American success story, but more compelling is the story of its international growth. Few companies on earth have Coca-Cola's strong commitment to local distribution and growth. When they championed in that 1971 commercial, "I'd like to buy the world a Coke, and keep it company," the Coca-Cola company was not kidding! They wanted to…and they did.
It may be also said of Coca-Cola in the 21st century, thanks to the growth and expansion of Coca-Cola bottlers worldwide: "when you buy a Coke, you buy the world."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.