Coca-Cola

I added to my position in Coca-Cola last week for the following reasons:

• Coca-Cola is the dominant player in the non-alcoholic beverage market and the company continues to grow and expand. It's two main competitors are PepsiCo and Dr Pepper Snapple. PepsiCo's beverage market is struggling to compete with Coca-Cola and it's slowly becoming a company defined primarily by its snack food business. Dr Pepper Snaple is the only other pure play beverage company and it's distribution is mostly limited to the United States with very little international competitive distribution. 
• It's a Dividend King as well as a Dividend Aristocrat and has been increasing its dividend annually for 51 years.
• It has 5 and 10 year revenue growth rates of 7.96% and 8.33%, respectively. 
• It has 5 and 10 year earnings growth rates of 8.90% and 8.00%, respectively.
• It has 5 and 10 year dividend growth rates of 8.06 and 8.00%, respectfully.
  
• It increased it's dividend once again in the first quarter of 2014 from $.28 to $.305 per quarter. On an annual basis this is an increase from $1.12 to $1.22. This is an increase of 8.92% and is above the 5 and 10 year dividend growth rates.
• The current dividend yield on the stock is now 3.20% which is well above the 2.50% I like to see when researching investments.
• It has a Return on Equity of 26.40% and a Return on Assets of 9.60%.
• It has a gross margin of 60.40%, an operating margin of 22.50%, and a profit margin of 18.30%. 
• It has recently purchased 10% of Keurig Green Mountain Coffee Roasters (GMCR) to move into the single serve home beverage market.
• It has a one year price target of $43.83 for an increase of 14.82% which when added to a dividend of 3.20% would equal a total one year return of 18.02%.
• The price of the stock is starting to rise from its recent low, its MACD is crossing upward, the RSI is moving up, and the ADX is reversing.
  
• The option chain for this company includes weekly options.

A little background on the Revenues, Earnings, Dividends, and Payout Ratios is always helpful when evaluating the potential acquisition of securities (see below). With earnings increasing to $2.25 in 2015, the P/E ratio will fall to a more reasonable level of 16.96 from 18.09 in 2014 and 20.09 today. I would also expect the dividend to be raised next year in the range of $.10-$.13 for a potential dividend of $1.35 going forward. This would result in a yield of 3.53% based on the current price of $38.17 per share.

Year
2015 est.
2014 est.
2013
2012
2011
2010
2009
2008

Revenues
$49.07 Bil
$47.00 Bil
$46.85 Bil
$48.01 Bil
$46.54 Bil
$35.11 Bil
$30.99 Bil
$31.94 Bil

Earnings
$2.25
$2.11
$1.90
$1.97
$1.85
$2.53
$1.46
$1.24

Dividends
---
$1.22
$1.12
$1.02
$.94
$.88
$.82
$.76

Payout Ratio
---
57.81%
58.94%
51.77%
50.81%
34.78%
56.16%
61.29%

As long as the price of Coca-Cola stock remains at or near this level I will continue to purchase additional shares over the next few months. While I don't believe these prices would be considered "fire sale" prices, they are sufficiently cheap enough to be considered "on sale". As such, accumulating shares at this level is an opportunity to acquire a great company at a great price.