Is the king of all drinks a good dividend stock? the ubiquitous Coca-Cola Company (NYSE: KO) shows stability and has maintained its position as one of the world’s most recognizable brands. The products the company makes have achieved extreme customer loyalty over time.
But is it a good dividend stock? Let’s take a look at Coca-Cola’s history, the reasons why it’s a good dividend stock, and how we can buy shares of the soda giant.
History of Coca-Cola Stock
How did Coca-Cola, one of the world’s most famous beverage companies, get started?
The final behemoth began product-only in 1886, in Atlanta, Georgia. dr. John Stith Pemberton, a local pharmacist, produced the syrup for Coca-Cola. He took it to Jacobs’ Pharmacy, combined it with carbonated water and sold it for five cents a glass. It sold a small number of drinks a day – just nine glasses.
Pemberton never realized the potential of his invention. He sold the Coca-Cola recipe to Asa Griggs Candler, an American business magnate and politician, for just $238.98 in 1888. Candler founded The Coca-Cola Company in 1892. In 1919, a group of businessmen led by Ernest Woodruff bought The Coca-Cola. Candler’s Cola Company for $25 million. That same year, Coca-Cola made its first public offering (IPO) on the New York Stock Exchange (NYSE), for $40 a share.
Since then, Coca-Cola Company has grown to more than 3,800 brands around the world.
The Coca-Cola Company, still based in Atlanta, manufactures and markets the following:
- Sparkling soft drinks
- Flavored and enhanced water
- Sports drinks
- Juice, dairy and plant-based drinks
- Tea and coffee
- energy drinks
- Beverage concentrates and syrups
- Fountain syrups at fountain shops
The company’s brands include more than just Coca-Cola, Diet Coke/Coca-Cola Light and Coca-Cola Zero Sugar. Brands also include Fanta, Fresca, Schweppes, Sprite, Aquarius, Ciel, Dasani, Ice Dew, Powerade, Minute Maid, Costa, FUZE TEA, Georgia and Gold Peak.
In the first quarter of 2022, The Coca-Cola Company’s net sales grew 16% to $10.5 billion and organic sales grew 18%. The company gained a value share in total non-alcoholic ready-to-drink (NARTD) beverages. Cash flow from operating activities was approximately $620 million, down $1 billion from the prior year. Free cash flow (non-GAAP) was approximately $400 million, down $1 billion from the prior year.
In the first six months of 2022, shares of Coca-Cola are up 6.3% despite a market ravaged by inflation and despite the pandemic being hit hard by the closure of restaurants and other locations that its brands feed. By comparison, the S&P fell 20.5%, proving that a brand can weather any storm that comes its way. In short, the Coca-Cola Company is a great dividend stock.
Reasons Coca-Cola (NYSE:KO) Makes Good Dividend Stock
The Coca-Cola Company’s most recent dividend was 44 cents per common share, payable to shareholders July 1, 2022, with a record June 15, 2022. The quarterly dividend increased approximately 5% from 42 cents to 44 cents from the last dividend increase.
Currently, Coca-Cola’s share price stands at $62.74 at the time of writing on July 7, 2022. It is also a Warren Buffett headliner – he first bought the stock in 1988 and it remains the fourth largest holding of his company.
Coca-Cola remains a member of the Dividend Aristocratsmeaning it has increased its dividend for 60 consecutive years, a promising return for dividend investors.
You may be wondering if market share will decline over time due to people’s tendency to turn to healthier alternatives. However, Coca-Cola has started expanding into African and NAARTD brands around the world, despite declining sales of sugary drinks. As consumers continue to make healthier choices, Coca-Cola could start making carbonated soft drinks without sugar.
Buy Coca-Cola stock?
Let’s take a look at how to buy shares of the Coca-Cola Company if you are interested in investment returns.
Step 1: Choose a brokerage.
Do you have a securities account? If not, then you need to choose the right brokerage for you. This can mean looking around for reasonable commissions, few extra fees, low account minimums, an easy-to-use platform and features. Your choice of broker should reflect your investing style. Do you prefer to trade stocks or do you prefer a buy-and-hold approach? Many dividend investors take a buy-and-hold approach to reap the long-term benefits of dividends. If your strategy involves a Buffett approach to dividend investing, you may want to choose a broker that is buy-and-hold friendly.
How much do you plan to invest? It’s best to budget for the number of shares you want to buy and invest accordingly. For example, if you have $1,000 that you want to invest, start there instead of how many shares you want to own. Divide the $1,000 you have available to invest by Coca-Cola’s current stock price. Your broker may allow you to buy fractional shares. This means that you can buy partial shares.
Let’s say when you actually buy it, The Coca-Cola Company’s stock price is $60.10 and you want to buy $1,000 worth of stock. In this case, you can buy 16.64 shares of the stock.
Step 3: Choose your order type.
Your trading platform offers you several order types to choose from. The type of order you choose will depend on your trading goals. For example, you may not want to use a particular order type when you intend to buy and hold your investment. You may want to choose a different order type when you plan to nothing but trade your shares.
- Market Order: A market order means that your trade will take place at the available market price without a specified price cap. If you want it to happen immediately, a market order is the way to go. However, remember that a market order will not necessarily be executed at the price you see. Prices may vary.
- Limit order: With a limit order, you can specify the price at which you want to buy or sell. In other words, you have more control over the price. Your buy order will only take place at the limit price or a lower price. Same with a sell order. They are fulfilled at the limit price or higher.
- Stop order: A stop order is a type of market order to buy or sell a stock when the stock price moves above or below a certain price. This “specific price” is called the stop price. If it reaches the stop price, it becomes a market order and fills at the next available market price.
- Stop Limit Order: A stop-limit order combines the features of a stop and limit order. In this case, an order will be executed at a certain price or better after a stop price has been reached. After that, the stop-limit order becomes a limit order to buy or sell at the limit price or better.
- Stop loss order: A stop-loss order can limit losses. You instruct to sell your assets when the price falls to or below a predetermined level.
A market order is the order type you may want to consider if you plan to invest in Coca-Cola for the long term as you may not have to worry too much about getting a “best price” short term for your investment.
Step 4: Complete your transaction.
Once you’ve chosen your order type, you’re ready to invest in The Coca-Cola Company. Navigate to your broker’s ticker box and enter “KO”. Then enter the number of shares you want to buy.
Is Coca-Cola a Good Dividend Stock?
Yes, The Coca-Cola Company is a good dividend stock and will likely grow in the coming years. The Coca-Cola Company was able to win over stakeholders and consumers and emerge stronger during the pandemic through revenue, income and cash generation – a good sign for future investors.