The Coca-Cola Co.: Time To Buy This 'Legacy Asset?'

Sep. 06, 2018 11:31 AM ETThe Coca-Cola Company (KO)34 Comments
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Small-Cap Detective


  • Coca-Cola is a dividend stock to own for the next 100 years.
  • The company's status as a legacy asset comes down to its timeless product, permanent cost advantage, and relationship with retailers.
  • After years of sideways trading, shares now look reasonably priced.

Today's post highlights one top dividend stock for the next 100 years... The Coca-Cola Co. (NYSE:NYSE:KO).

Regular readers have heard about my concept of “legacy assets” before. In short, this group consists of an elite collection of companies that have paid out dividends for decades. Thanks to their entrenched market positions, you can buy these stocks today and hold them for the rest of your life.

Coca-Cola represents a textbook example. People have enjoyed the company’s tasty beverages for generations, turning shares into an income machine. While the stock doesn’t grace the covers of many financial magazines, long-time investors have made absolute fortunes.

But do shares present a good place to put fresh money to work today? Maybe. Let’s take a deep dive into this distribution.

The Dividend - Is It Safe?

Coca-Cola’s dividend remains one of the safest on the market, first off. The company has spent billions of dollars on marketing over the past century, building a connection with customers. Management also enjoys a close partnership with retailers, as they don’t want to risk sales or costly out-of-stocks with unproven suppliers. If you wanted to bite into Coca-Cola’s business, it would be difficult to replicate these relationships.

Looking at the numbers, Coca-Cola stands in fine financial health today. The business generates $9.24 in profits for every dollar paid in interest. The company's debt-to-equity ratio sits at 1.53, which is below average for the consumer staples space. To squeeze a few extra points of return from the business, executives could lever up their balance sheet. Management, however, has opted for a more cautious approach.

Coca-Cola’s careful way of doing business shows up on the company’s income statement, too. Executives pay out about $0.75 in dividends for every dollar generated in earnings. In a more cyclical business, such a high payout ratio would raise red

ChartKO Dividend data by YCharts

This article was written by

Small-Cap Detective profile picture
My investment philosophy favors passive long-term holding of dynamic growth stocks.

Disclosure: I/we 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.

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