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Great deals on offer for dividend investors coca cola (NYSE:KO) Recent inventory. The beverage giant’s yield is just over 3% at the time of writing. So if you invest about $13,000 in stocks, you’ll earn $400 a year.
Of course, we recommend making such investments in the context of a diversified portfolio that includes exposure to many other sectors and industries. However, Coke can be a very positive force in such a portfolio. Let’s take a look at some of the reasons.
Latest results
Coca-Cola’s mid-February earnings report contained a lot of good news for shareholders.Fourth-quarter organic sales rose 12%, management said, outpacing competitors. pepsico (NASDAQ:PEP). Coke benefits from a higher share of takeaway sales and a more focused portfolio. At the moment, it also helps that it doesn’t have as much exposure to snack foods as PepsiCo does.
Coke has also been successful in expanding into non-traditional beverage categories such as energy drinks and sparkling water. “We are confident that our all-weather strategy, strong portfolio and harmonized systems will continue to create value for our stakeholders,” CEO James Quincey said in a fourth-quarter press release. But Wall Street has modest expectations for the business. Most analysts expect sales to be flat this year, which is why Coca-Cola stock is relatively cheap after weathering the market’s rally over the past year. helps explain.
revenue and profit
Meanwhile, the company’s earnings are growing rapidly, and shareholders are in a great position to hold onto the stock patiently while they collect passive income. Coke’s operating margin rose to an industry-leading 23% of sales in the fourth quarter, driving a 13% annual profit increase. Adjusting for exchange rate fluctuations, the increase in 2023 is a very high 21%.
Cash production looks strong as well, with free cash flow again reaching around $10 billion in 2023. This performance allowed management to direct his nearly $2 billion toward stock buybacks. But Coca-Cola’s bigger priority is clearly its dividend. Coca-Cola spent $8 billion in dividend payments in 2023, up from $7.6 billion in 2022. An even larger dividend increase is expected in the second half of 2024, marking Coca-Cola’s 62nd consecutive annual increase.
price is fair
You’ll have to pay a bit of a premium for Coca-Cola stock, at least compared to other consumer staples giants. PepsiCo stock trades at 2.5 times annual sales, less than half of Coke’s valuation.
However, Coke’s profit margin is much higher – 28% compared to Pepsi’s 14%. The company is growing even faster, with both sales and profits increasing over the past full year. In contrast, Pepsi had to rely solely on price increases to maintain overall sales.
The good news is that dividend investors can sit back and collect passive income from Coca-Cola while they wait for Coca-Cola’s stock returns to more closely match its stellar financial metrics. Whether he can invest $1,300 or $13,000 in this business today, he will probably be satisfied with an immediate yield of 3% or more. To be sure, there are faster-growing stocks outside of the consumer staples niche. However, Coke offers a balance of growth, income and stability that should be very attractive to those focused on long-term returns.
Should you invest $1,000 in Coca-Cola right now?
Before buying Coca-Cola stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks For investors to buy now…and Coca-Cola wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
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*Stock Advisor returns as of March 11, 2024
Demitri Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
Want $400 a year in passive income? Invest $13,000 in this Dow giant dividend stock Originally published by The Motley Fool
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