Wednesday, July 15, 2015

Does The Coca-Cola Company Still Have The Recipe For Out-Sized Returns?

There's no mistake that one of the greatest wealth creators of the last century is The Coca-Cola Company (NYSE:KO). With 20 different beverage brands generating over a billion dollars in annual revenues they are the envy of plenty of companies. Especially when you consider that most of their profits are generated from water, sugar, and flavoring. That's a truly tremendous feat. They also have a vast distribution network which is the strength of their company with access to over 200 different countries around the world. Coca-Cola Company also belongs in the exclusive club of 50+ consecutive years of dividend increases. Shares closed trading on Friday, July 10th at $40.39 giving a current yield of 3.27%.

The following tables/graphs are taken from my personal stock analysis spreadsheet. Data for the stock analysis was sourced from The Coca-Cola Company's investor relations page, Morningstar, and Yahoo Finance.

Historic Growth Rates:

Historically, owners of Coca-Cola Company have earned solid returns. According to longrundata.com, KO has delivered investors with a total return of 152.8% or 9.7% annualized returns over the last 10 years. Those numbers are market returns at specific snapshots in time and aren't necessarily indicative of the business results over the same time period. Looking at the historic growth rates for per share dividends, earnings, revenue, and free cash flow gives a better idea of the true operational results that Coca-Cola has delivered.

Continue reading The Coca-Cola Company stock analysis over at Seeking Alpha.  You can also find the rest of my stock analysis reports on my stock analysis page.

2 comments:

  1. Excellent analysis, as usual!

    At $41+ I think KO is still trading at a premium to fair value and not at fair value. If it dips below $40, I'd be interested. In fact, I've sold $40 August Puts in another account to at least generate some income while I wait for a better entry point.

    Take care!

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    Replies
    1. Ferdi,

      Agreed. $40 seems to be a decent entry point for KO although $38/39 would be better give the current position size and the fact that there's quite a bit of headwinds for KO. However, the currency headwinds are at least short term in nature and will flow back the other way in a few years once the USD weakens.

      I like your put selling with KO. I really want to get some cash saved up and set aside just to use for option trading purposes with a few select companies. I think that's a pretty good way to use excess capital if you can't find enough companies trading at good enough values for full purchase. KO is a good one to sell puts against and I'm thinking either T or VZ for a sell puts til assigned and then sell calls til called away. The share prices for both are pretty stable and the yields are solid and the option premiums can be decent enough to provide a little extra yield on top of the dividend. You should be able to generate an extra 5% or so per year if not more than that from serial option selling.

      Thanks for stopping by!

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