Coca-Cola (NYSE: KO) stock buyers have a conundrum. Over the past 30 years, beverage major shares have returned 1,130% (including dividends). That trails S&P 500 gains. However, this top beverage stock has been a good long-term investment. It's why Warren Buffett's Berkshire Hathaway's huge equities portfolio ranks Coca-Cola fourth.
The corporation offers beverages in over 200 countries and has a $260 billion market worth. With $46 billion in 2023 revenue, it is the world's largest nonalcoholic ready-to-drink corporation. Since it's everywhere, where else can it go? This contradicting thinking has some wondering if it's too late to acquire Coca-Cola stock. Perhaps we can discover a solution.
Coke quenches the world's hunger. Coca-Cola dominates. It dominates the market with Coca-Cola, Sprite, Dasani, Minute Maid, Costa Coffee, Gold Peak Tea, Fanta, and Powerade, among others. More than 30 million stores sell the company's products.
Due to its lengthy and prosperous history, Coca-Cola is well-known. Supports its economic moat. Loyal customers won't switch to competitors' items. This gives businesses pricing power, which is valuable.
Coca-Cola's brand success allows them to take production risks competitors can't. Much of its beverage production and distribution (and costs) are handled by its global bottler partners. Often, Coca-Cola licenses brands and provides flavorings. The move saves Coca-Cola a lot of money. This generates a very profitable business. Over the past decade, Coca-Cola's gross margin has averaged 60.4%. This outperforms Apple and Nike.
Even after investing in expansion initiatives, management has plenty of cash to repay to shareholders due to the mature industry. It bought back $2.3 billion in shares last year. Income-seeking investors like its 3.2% dividend. That dividend has been increasing annually for almost 50 years, making it a Dividend King.
Can Coca-Cola stock outperform? If you're searching for a mature, dependable business to invest in, Coca-Cola is a good choice. But if you want long-term results, it's different. The stock's total return (including dividends) has lagged the S&P 500 over one, three, five, 10-, 20-, and 30-year periods. Poor track record.
The stock now has a 24.4 price-to-earnings ratio. This is slightly higher than the S&P 500 at 23.1. Should investors pay above-market value multiples for a company that persistently lags the major index?
Coca-Cola's low growth potential contributes to its low returns. Revenue fell from 2013 to 2023. Over the past decade, diluted profits per share climbed 2.7% annually. It's hard to imagine these trends ending. The leadership team claims that few people worldwide are customers. They believe that expanding into existing and new areas and capitalizing on population increase can boost the firm.
Investors shouldn't expect customers' drinking habits to change drastically. Coca-Cola is in a slow-growing business. It's not a tech giant targeting a huge market. One of the world's most famous brands. It's too late to acquire the stock for market-beating growth.
stay turned for development