| Coca-Cola has one of the most impressive Dividend History Charts of any company on the list of Dividend Aristocrats. Normally a chart like leads me to believe it's the kind of company that should be in my portfolio. But charts like this always look backward. So before I put down a bunch of money on this stock, I thought I'd look at the fundamentals and see if I can figure out what's going on today to determine if it's still a good buy.  |  |
The Coca-Cola Company, a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company's still beverages comprise nonalcoholic beverages without carbonation, including noncarbonated waters, flavored and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, beverage ingredients, and fountain syrups, as well as powders for purified water products. The Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero, Fanta, Sprite, Minute Maid, Georgia, Powerade, Del Valle, Schweppes, Aquarius, Minute Maid Pulpy, Dasani, Simply, Glaceau Vitaminwater, Bonaqua/Bonaqa, Gold Peak, FUZE TEA, Glaceau Smartwater, and Ice Dew brand names. The company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independent bottling partners, distributors, wholesalers, and retailers. The Coca-Cola Company was founded in 1886 and is headquartered in Atlanta, Georgia.
(Summary) (Company) (Chart)
| 10 August 2016 Price $43.61 1yr Target $47.76 Analysts 17 Dividend $1.40 Payout Ratio 80.45% 1yr Cap Gain 9.51% Yield 3.21% 1yr Tot Return 12.72% P/E 25.11 PEG 8.37 Beta 0.58 | EPS (ttm) $1.74 EPS next yr $2.02 Forward P/E 21.63 EPS next 5yr 3.00% 1yr Price Support $6.06 Market Cap $188.31 Bil Revenues $43.25 Bil Earnings $7.62 Mil Profit Margin 17.61% Quick Ratio 1.10 Current Ratio 1.20 Debt/Equity 1.80 | 1yr RevGR -3.71% 3yr RevGR -2.63% 5yr RevGR 4.75% 1yr EarnGR 4.37% 3yr EarnGR -5.31% 5yr EarnGR -7.98% 1yr DivGR 8.19% 3yr DivGR 8.88% 5yr DivGR 8.44% ROA 8.30% ROE 29.50% |
My Perspective
As a dividend growth stock this company has been on auto pilot for years. They've consistently raised their dividend by 8% every year for as long as I can remember. Anyone who has owned shares of Coca-Cola has been rewarded very nicely. But lately the fundamentals have started going in the wrong direction and this gives me pause. Revenues and earnings have been sporadic despite the company continuing to raise the dividend, and this is starting to show up in the payout ratio. At 80% the company is going to start having trouble increasing their dividend.
A slowing of revenues and earnings is usually the first sign that the company is starting to get into trouble. When this happens management often continues to grow the dividend hoping that many of their shareholders won't notice the deteriorating fundamentals. The percentage payout ratio begins to rise abnormally high and ultimately the dividend is frozen or cut. When that happens investors will sell and the stock will get hammered. By the time management's bonuses are cut (those are usually preserved until the absolute end) it's too late for shareholders.
The fundamentals above indicate to me that Coca-Cola is already started down that path. And as a shareholder I'm monitoring the situation closely to see if there's a remote possibility of a turnaround but if things continue down this path I could very quickly be an ex-shareholder of Coca-Cola. Let's hope for the best because I've really enjoyed that increasing dividend all these years.
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