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Trending: Coca-Cola Pulling Host of Drinks in Portfolio Shakeup

Iuri Struta Oct 08, 2020

Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

Beverage giant Coca-Cola has taken the first position in the list this week, as the company is implementing a series of changes to its portfolio of drinks to cope with the coronavirus pandemic. Second in the list is oil major Exxon Mobil, whose strategy of doubling down on fossil fuels is backfiring. Tobacco products maker Altria is third, as the company is scrambling to find its next leg of growth amid dwindling demand for cigarettes. Pharma giant Johnson and Johnson closes the list, with the company rushing to find a vaccine for the COVID-19 pandemic.

Don’t forget to read our previous edition of trends here.

Coca-Cola

Coca-Cola (KO) has trended first this week, as the beverage giant is pulling a string of drinks that failed to live up to their promises. The coronavirus pandemic has hit Coca-Cola’s sales, and the company is now looking to focus on its best-sellers and cut costs.

Shares in Coca-Cola are down 11% year-to-date, underperforming the S&P 500 Index, which rose 4% during the same period. The company’s direct sales to customers have benefitted from the pandemic but failed to offset the drop in sales to restaurants.

In a bid to become more focused, Coca-Cola recently announced it would discontinue its coconut water brand Zico, as the beverage failed to live up to its promise due to strong competition and weak growth. At the same time, Coca-Cola is considering pulling the plug on brands such as Diet Coke Feisty Cherry, Coke Life, and regional Delaware Punch.

The company owns around 500 brands globally and last month said it aims to cut that portfolio in half, as part of a restructuring spurred by the coronavirus pandemic.

Coca-Cola, which has a market capitalization of a little over $200 billion, pays an annual dividend of $1.60 per share, amounting to a dividend yield of 3.24%.

KO

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Exxon Mobil

Exxon Mobil (XOM) has taken the second spot in the list this week, as the oil major is set to post another loss in the next quarter due to weak oil prices.

To be clear, Exxon’s results will be helped by a recovery in oil prices but not enough to avoid a third consecutive quarterly loss, which would be the first time in at least 36 years. The company estimated that its per-share earnings could be between negative 67 cents per share and positive 3 cents per share. Analysts expected a loss of one cent per share.

Exxon’s strategy is to double down on oil and gas production at a time when other oil majors such as BP (BP) and Royal Dutch Shell are moving toward renewable energy to cut emissions. Exxon’s move has backfired, as investors avoid carbon emitters and the coronavirus pandemic has put pressure in the short term.

Shares in Exxon have declined more than 50% since the start of the year, and the $141 billion market capitalization company was removed from the S&P 500 after 92 years. Exxon still pays a $3.43 per share dividend, yielding a whopping 10%, in a signal that investors believe it is unsustainable. The company is currently relying on debt to pay out shareholders, and if its performance does not turn around, the dividend will most likely be cut.

XOM

Altria Group

Tobacco products maker Altria Group (MO) has trended third on our list. Altria has been experiencing a slow decline in its traditional cigarette business, as consumers are becoming more conscious about their health and governments around the world are cracking down on smoking.

As a result, the company has been moving into alternative smoking products that are considered healthier, including Juul, in which it invested $12.8 billion in 2018 for a 35% stake, and IQOS, a device that heats tobacco but doesn’t burn it.

While IQOS was recently approved by the U.S. Food and Drug Administration (FDA) and will begin commercialization soon, Juul is facing an investigation over an outbreak of lung injuries believed to be caused by its vaping product.

The coronavirus pandemic has not had a terrible impact on the company’s financials. Revenues in the second quarter declined by just 3.8% year-over-year, largely due to a drop in wine sales and smokable products. The company’s low-risk products have seen sales rise more than 9% during the same period.

Altria shares have lost around 20% since the start of the year. The company pays a dividend of $3.44 per share, yielding more than 8%.

MO Barchart Interactive Chart 10 07 2020

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Johnson & Johnson

Pharma giant Johnson & Johnson (JNJ) is the fourth most popular ticker over the past two weeks, partly because the company’s COVID-19 vaccine trial showed strong results. As a result, J&J’s vaccine entered the third and last stage of trial before it could receive approval from the FDA.

The competition to create the first vaccine for COVID-19 is intense. Seven other companies have drugs in the Phase 3 trial, including Novavax, AstraZeneca, and Moderna.

Despite the good news, Johnson & Johnson shares are up just 1.5% year-to-date, underperforming the S&P 500 Index by around 4 percentage points. J&J pays an annual dividend of $3.75 per share, equal to a yield of 2.5%.

JNJ Barchart Interactive Chart 10 07 2020

The Bottom Line

Coca-Cola is withdrawing a host of beverages as it looks to focus on the most profitable categories from its portfolio amid falling demand. Exxon Mobil is set to post another quarterly loss, something not seen in more than three decades. Cigarette maker Altria Group is faring relatively well, as traditional cigarette sales are slowly falling but it’s healthier products enjoy strong growth. Johnson & Johnson’s COVID-19 vaccine is entering the last phase trial, although the stock still underperformed the main index.

Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.

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