A quantity of 50 Coca-Cola Company (NYSE:KO) 1993 series century bonds is currently being offered. In the past 3 hours, 16 of the bonds have sold and as of now 34 remain on the market. There is a minimum purchase quantity of one bond.
In 1993, Coca-Cola issued century bonds with a 7.3% coupon. Unlike many other securities, century bonds have an expressed ultra long-term schedule.
|Coca-Cola Company Debenture 7.375% 07/29/93 (cusip: 191216AF7) call protected||$146.31||5%|
|Coca-Cola Enterprises (NYSE:CCE) Inc Glbl Bd 7% 2098 (cusip: 191219BD5) callable||$158.01||4.3%|
11/04/2010 5:23 PM EDT OTHER MATERIAL EVENT TENDER OFFER AS OF 11/04/10
05/25/2007 3:30 PM EDT OTHER MATERIAL EVENT NEGATIVE MDY CREDIT WATCH ON 05/25/07
03/30/2005 5:30 PM EST OTHER MATERIAL EVENT AMOUNT OUTSTANDING 117304.00 AS OF 03/30/05
Seven hundred and fifty Coca-Cola century bonds were sold on August 2, 2012 for $157.53 (4.63% yield.). Minimum lots of 50 bonds were offered. However, there were no buyers.
The lot currently on the market was sold August 24, 2012 for $142.50 (5.1% yield.) It will take six years for the bond's fixed income to surpass the premium. These bonds have sinking fund protection, so part of the bond will be repaid before the stated maturity.
One thousand dollars today is likely worth more than it will be in the future. In 2093, you might need $1,000 to get a Coke from the vending machine. Investors with inflation concerns could take Coca-Cola Corp. bond income and invest in an inflation protected CEF or gold.
The Coca-Cola century bonds will pay $73.75 a year in fixed income. Each bond should pay about $5,000 in the next 70 years. The owner of just one Coca-Cola century bond could create a complex income strategy. For instance:
|2012-2015||Every 3 years invest 50% of Coca-Cola income in an inflation protected fund and high income fund. Invest the remaining 50% directly into Coca-Cola stock.|
|2016-2021||Every 3 years invest 50% of Coca-Cola income in an inflation protected fund and high income fund. Invest the remaining 50% directly into Coca-Cola stock.|
|2022-2027||Every 3 years invest 50% of Coca-Cola income in an inflation protected fund and high income fund. Invest the remaining 50% directly into Coca-Cola stock.|
The iShares Barclays 20+ Year Treasury Bond ETF (NYSEARCA:TLT) price has risen dramatically.
Few prime-1 corp. bonds currently yield 5% because rates are low. Educational institutions have recently introduced century bonds for as low as 4.69%. In theory, century bonds should have a higher yield than a 30 yr bond. There should be plenty of opportunities, so you could keep more expensive bonds on a watch list.
Century Bonds vs. 10 YR Corp. Bonds
A century bond (or multiple century bonds) should not exceed 1% of a portfolio. Investors may also wish to consider near-term bonds instead. For example:
|Coca-Cola Co Nt 3.3% 2021 (cusip: 191216AV2) callable||$110.03||2%|
|Pepsico Inc Sr Nt 5% 06/01/2018 (cusip: 713448BH0) call protected||$107.58||2.1%|
The short-term bonds yield 10% more than 10 yr U.S. Treasuries. Their principal will be returned in the near-term, while the Coca-Cola 2093 bond's principal won't be until 2093. Century bonds are novel, however, if considered as part of a strategy, they can add to a portfolio's income stream.
If you have any comments or would like to suggest another security to consider relative to Coca-Cola's century bonds, please comment below.
Disclosure: I am long KO, MCO, PEP, WIW. 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.
Additional disclosure: I am long Coca-Cola Company 7.3% 07/29/2093 and Coca-Cola Enterprises 7.000% 05/15/98.