Coca Cola (KO) is the world’s largest beverage company
marketing through a network of company owned and independent bottlers over 500
nonalcoholic beverages worldwide including Coca Cola, Sprite, Barq’s, Xtra,
Fanta, Fresca, Dasani, Evian, Danone, Powerade and Minute Maid. The company has
grown profits and dividends 9-10% for the past 10 years earning a 27-30% return
on equity. We expect the company to continue to do well as a result of:
(1) its incomparable portfolio of sparkling and still
beverages as well as juices,
(2)
increased marketing effort,
(3) management
aggressive effort to improve productivity,
(4) new product innovation,
(5) geographic
expansion especially in emerging market countries [Russia, Brazil, China].
Negatives:
(1) it is in a highly competitive industry,
(2) its sensitivity to volatile commodity prices,
(3) its international operations expose it to the risks of
currency fluctuations,
(4) soft economic conditions,
(5) slowing growth in carbonated beverages.
KO is rated A++ by Value Line, has a 36% debt to equity
ratio and its stock yields 3.0% which has been raised for 47 consecutive years.
Statistical
Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2004
KO 3.0% 8 58% 10
Ind Ave 2.3 10* 38 NA
Debt/ EPS
Down Net Value Line
Equity ROE Since 2004 Margin Rating
KO 36% 27% 1 20% A++
Ind Ave 37 24 NA 14 NA
*many companies in KO industry do not pay dividends
Chart
Note: KO
stock made great progress off its March 2009 low, quickly surpassing the downtrend off its January 2008
high (straight red line) and the November 2008 trading high (green line). Long term, it is in an uptrend (blue
lines). Intermediate term, it is in an
uptrend (purple lines). The wiggly red
line is the 50 day moving average. The
Dividend Growth and High Yield Portfolios own 75% positions in KO, having Sold
Half in early 2008 and it having experienced subsequent appreciation. The upper boundary of its Buy Value Range is
$39; the lower boundary of its Sell Half Range is $62.
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