Coca-Cola

The Coca-Cola Company may not be on every investor's lists of favorite stocks, but if investors dig into the numbers and the charts for even a small amount of time, they may find that this company might possibly put a smile on every investor's face. 

The Company

The Coca-Cola Company (KO) manufactures and distributes coke, diet coke, and other soft drinks worldwide. The company primarily offers nonalcoholic beverages, including 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. In addition, the company licenses its technologies to suppliers and third parties. The Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glacéau Vitaminwater, Georgia, Simply, Minute Maid Pulpy, Del Valle, Ayataka, Bonaqua/Bonaqa, and Schweppes brand names. The company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independently bottling partners, distributors, wholesalers, and retailers. The Coca-Cola Company was founded in 1886 and is headquartered in Atlanta, Georgia. (Daily Chart) (Weekly Chart)

22 October
Price $40.62
1yr Target $45.46
Analysts 20
1yr Cap Gain 11.91%
Dividend $1.22
Yield 3.00%
1yr Est Tot Return
      14.91%

Market Cap $178.16 Bil
Beta 0.48
EPS (ttm) $1.87
Payout Ratio 65.24%
EPS next yr $2.19
P/E 21.72
PEG 5.05
Forward P/E 18.53
Debt/Equity 1.18
ROA 9.10%
ROE 25.40%
ROI 11.20%
Sales $46.22 Bil
Income $8.37 Bil
Profit Margin 18.10%

Coca-Cola may be providing an opening for long term investors to grab a great company at a reduced price. Most of the carbonated beverage companies' (Coke, Pepsi and Dr Pepper) problems are well known and documented elsewhere on the internet. Most analysts are blaming the millennial generation for their changing tastes in beverages. The next generation is, in fact, drinking more non-carbonated beverages and the cola companies have been slow to react. 

It's also recognized that these companies have finally woken up to this fact and are now trying to change their product mix as quickly as possible. Have no doubt that they'll be successful (as they have many times in the past) but these companies are so large that it is going to take time for this to occur. As a result, earnings have taken a short term hit causing the stock price to take a hit as earnings are announced and progress is being gauged. 

For the smart long term investor this is an opportunity to accumulate shares in a great company at a temporarily depressed price. I expect KO to grow at a similar rate (10%) as it has in its past for many years into the future. I also expect KO to continue to distribute a very similar and generous dividend (yield of around 3%) as it has in the past. 

Coca-Cola also looks like a great opportunity for the dividend growth investors. KO has been growing its dividend at a rate of about 8-9% per year for a decade and it's been increasing its dividend without a break for the last 51 years. Over the years this company has become the near perfect definition of a dividend growth company. 

With a P/E ratio of just over 20 this year and just under 20 next year, this company is fairly priced and great companies like this rarely become cheap. A 3% dividend growing at 8% per year is hard to walk away from. Add in an estimated one year capital gain of 10% and this is a real gem.

Revenue Growth Rate
3 year = 9.98%
5 year = 7.96%
10 year = 8.33%
Earnings Growth Rate
3 year = -9.02%
5 year = 8.91%
10 year = 8.00%
Dividend Growth Rate
3 year = 8.28%
5 year = 9.85%
10 year = 9.79%

The Technicals

Looking at the price charts below it's obvious that this stock is a great trading stock for slow swing traders. A trader could trade using the Bollinger Bands, the Relative Strength Index, the MACD or the ADX. They're all pretty much in sync and the signals confirm the price movement of the stock and each other. As long as the swing trader has the patience and discipline to trade at the reversing points every couple of months, there's a lot of money to be made here. 

Daily Chart

Weekly Chart

My Perspective

I see opportunities for the entire spectrum of investors. This stock is suited for long term investors, dividend growth investors, as well as swing traders. And that's just about everybody. It's just a matter of understanding the timeframe and perspective. I actually could see doing all three of these things with this stock and I could see myself ending up with a nice little nest egg. 

I see very little downside here except for those very short periods that would allow me to get in at a very pleasant price. With its high liquidity and the ability to use options with this security, it's possible to use puts and calls to get into and out of positions and therefore enhance the position's income above the normal yield of the dividend. 

If you're the type of investor that notices trading volume, you'll see a few more of my buys going across the ticker real soon. 

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Additional Articles:
Swing Traders and Options Sellers, dated 4 August 2014
Soft Drink Companies, dated 12 June 2014
Six Companies On My Want List, 7 June 2014
Coca-Cola, 16 March 2014
The Coca-Cola Company, 3 March 2014

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