Sunday, November 15, 2015

Recent Transfer: The Coca Cola Company

The Coca Cola Company (NYSE:KO) is the world's largest beverage company and the leading producer and marketer of soft drinks. Along with Coca-Cola, recognized as the world's best-known brand, KO markets four of the world's top five soft drink brands, including diet Coke, Fanta and Sprite. KO was founded in 1886 and is headquartered in Atlanta, Georgia.

I'm busy transferring stocks in my portfolio at Scottrade to DivGro. In the process, I'll be providing details about past transactions and explain why I'm a shareholder. Please look for my upcoming stock analysis of KO.

I own 65 shares of KO with an average buy price of $38.83 and an average yield on cost (YoC) of 3.19%. The company pays quarterly dividends of 33¢ per share, or $1.32 annualized. With this transfer, DivGro's projected annual dividend income increases by $85.80 and I'm adding $100.20 of past dividend income.

So far, my investment in KO is working out nicely! Total return is 10.24% (or 8% annualized) and I've received 3.96% of my original investment back in dividends.

Transactions

2014-03-20 Bought: 50 shares of KO at $38.39 per share: $ 1,919.50
2014-07-01  Dividend on 50 shares at 30.5¢ per share:  $ 15.25
2014-10-01  Dividend on 50 shares at 30.5¢ per share:  $ 15.25
2014-12-15 Dividend on 50 shares at 30.5¢ per share:  $ 15.25
2015-04-01  Dividend on 50 shares at 33.0¢ per share:  $ 16.50
2015-07-01  Dividend on 50 shares at 33.0¢ per share:  $ 16.50
2015-07-07 Bought: 15 shares of KO at $40.29 per share: $ 611.35
2015-10-01  Dividend on 65 shares at 33.0¢ per share:  $ 21.45
                                                                
 Total Capital Invested $ 2530,85

Total Dividends Received:$ 100.20

My 2 buys are indicated in the following chart. The second purchase of 15 shares was at a somewhat higher level than the first purchase. It happens to round out the total capital invested to about $2,500, which is the usual size of my DivGro buys.
Source: Scottrade

Why KO?


KO is one of the most popular stocks among dividend growth investors. In fact, KO is the second most popular stock in The Blogger's Dividend Growth Portfolio, a portfolio I compiled last year containing the 52 most popular dividend growth stocks trading on U.S. exchanges.

When I decided to give my sons seed money to open Loyal3.com accounts and to buy stocks, one of my sons selected KO as his first ever stock. At the time, I owned shares of KO in my Scottrade portfolio but not in DivGro – the stock was not trading at a discount to fair value of at least 5%.

So, does KO trade at a discount now? To answer that question, I'm doing a comprehensive stock analysis of KO to determine fair value. If KO does trade at a nice enough discount, I may just add more shares!

Meanwhile, here are some reasons I like KO and why I decided to transfer the shares to my DivGro portfolio:

  1. KO is a Dividend Champion and a member of the S&P 500 Dividend Aristocrats
  2. The company has a stellar track record of 53 consecutive years of dividend increases. 
  3. KO yields nearly 3.2% and grows dividends at a rate of about 9% annually. 
  4. KO's payout ratio averages 55.5% over the last 10 years.
  5. With its iconic brand and worldwide distribution network, KO has a wide economic moat.
Do you own shares of KO? Is the stock trading at, above, or below fair value? Please share your ideas about KO in the comments section.

4 comments :

  1. KO has definitely been a long term winner and surprisingly I think the future returns could still be solid from here. I figured the increase back up to the $42 level brought the expected returns down to levels that wouldn't make it appealing but it looks to still be able to offer almost double digit rates of return and of course continued dividend growth for years.

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    Replies
    1. I agree -- I think future returns should be solid. I'm not quite done with my stock analysis, so I'm not sure yet if $42 is at or above fair value. If KO continues to grow dividends at about 9% annually, I think it will turn out to be a solid longterm investment. Certainly, anybody that bought 10 years ago should be happy with their total return!

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  2. Very nice. Coca-Cola is one of the few businesses out there where it is very difficult to imagine the company will not continue to grow indefinitely.

    ReplyDelete
    Replies
    1. Thanks -- KO has a huge advantage with its direct and worldwide distribution network. And the brand is universally known. So I can't help but agree with you, even if concerns about the sugar content of KO's products build steam. With its financial strength, KO can easily develop alternative products and more healthy alternatives.

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