Dividends in Focus: The Coca-Cola Company (KO)

Dividends in Focus: The Coca-Cola Company (KO)


Beverage industry juggernaut Coca-Cola Co. (KO) managed to rake in a positive return of 9% for 2013, although it lagged behind the broad stock market as investors favored securities from more growth-sensitive sectors. Let’s examine the company’s current dividend policy and what lies in store for the stock in 2014 from a dividend perspective.

Coca-Cola Co.’s Current Dividend Policy

Coca-Cola pays its dividend quarterly and currently offers a yield of around 2.8%. The stock’s quarterly payout of $0.28 per share has held steady throughout 2013, but the company has a history of raising dividends on an annual basis. In fact, Coca-Cola belongs to the elite group of Dividend Aristocrats, which are companies that have been increasing their annual dividends every year for at least the past 25 years. Coca-Cola ranks near the top of this prestigious list given its track record of raising dividends consistently for 50 years, since 1963.

Based on analyst estimates, its payout ratio sits around 53.6% for 2013, and is expected to come in at 50% in 2014. Looking at these numbers, KO should have no issues raising its dividend again next year, keeping up with its superb 50-year track record.

Dividend.com DARS Ratings for Coca-Cola Co.

Overall Rating:Neutral (3.4/5)

Metric Rating Explanation
Relative Strength Stock is performing in-line with the market or better.
Overall Yield Attractiveness Stock’s dividend yield is adequate.
Dividend Reliability This rating is related to the length and consistency of a company’s dividend payouts, as well as our opinion on how likely the company is to continue payouts in the future.
Dividend Uptrend Dividend payouts are consistent, but increases small.
Earnings Growth Earnings estimates are uptrending.

The Bottom Line

Coca-Cola has been slowly, but surely, clawing its way back up to price levels last seen in 1998 when the stock peaked just below $45 a share. Given its track record of raising dividends consistently, its yield hasn’t been a very helpful metric in gauging attractive buying opportunities; for the most part, KO can be considered a definitive “Buy” when its dividend yield tops the 3% mark. Although Coca-Cola doesn’t boast as exciting growth prospects as many technology stocks, this company will remain a leader in the beverage industry given its globally-recognized brand. This means that conservative dividend investors can most likely count on this behemoth to continue delivering a growing stream of distributions.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.