Dividend investors are getting a great deal on Coca-Cola (NYSE: KO) stock. The beverage giant's yield is just around 3%, so investing $13,000 in the stock may yield $400 every year. This type of investment should be made in a diversified portfolio with exposure to different sectors and business types. However, Coke can boost such a portfolio. Let's examine some reasons.
Coke's mid-February earnings release was beneficial for stockholders. Management reported 12% organic sales growth in the fourth quarter, outperforming PepsiCo (NASDAQ: PEP). Coke benefits from its increased on-the-go beverage sales and focused portfolio. Not having as much snack food exposure as PepsiCo helps it right now.
Coke's energy drink and sparkling water efforts are also successful. "We're confident that our all-weather strategy, powerful portfolio, and harmonized system will continue to create value for our stakeholders," Q4 CEO James Quincey said. Wall Street expects little from the company. Most experts expect sales to be flat this year, which explains why Coke's stock is at a discount after missing the market's gain.
Its earnings are growing swiftly, allowing shareholders to patiently keep this company and gain passive income. Q4 operating profit grew to an industry-leading 23% of sales, enabling Coke's earnings rise 13% for the year. Adjusting for currency exchange rate changes boosts 2023 growth to 21%.
Cash production remains strong, with free cash flow reaching $10 billion in 2023. Management allocated roughly $2 billion for stock buybacks due to this performance. But Coke's dividend is more important. In 2023, Coke paid $8 billion in dividends, up from $7.6 billion in 2022. Further dividend increases are expected in 2024, Coke's 62nd consecutive annual increase.
Coca-Cola stock costs more than other consumer staples titans. Coke's worth is 2.5 times yearly revenues, while PepsiCo's is 2.5.
Coke's 28% profit margin beats Pepsi's 14%. The company's revenues and profits increased last year, indicating faster growth. Pepsi, however, relied only on price increases to boost sales.
Dividend investors can relax and earn passive income from Coca-Cola while its stock returns catch up to its strong financial metrics. This business's over 3% immediate yield will satisfy you whether you invest $1,300 or $13,000 today. Yes, there are faster-growing equities outside consumer staples. However, Coke's balance of growth, income, and stability should appeal to long-term investors.
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