The Coca-Cola Company (NYSE:KO)
If you’ve even been down a supermarket drinks aisle, then it’s almost guaranteed you’ve seen Coca-Cola. The sweet, caffeinated drink has been around for over a hundred years and has become almost ubiquitous with the soft drink industry. Outside of its namesake, the Coca-Cola Company (KO) also operates a myriad of household names including Fanta, Sprite, and Powerade. Recently, the beverage company has peaked investor interest, leading to a 79.44% in mentions, a sign that sentiment is shifting bullish and people are wondering whether the Coca-Cola company is a good investment. Currently, Coca-Cola Co is trading at $64.61, an almost 9% YTD premium.
Is Coca-Cola a Good Investment - Positives
Coca-Cola has long been a favorite among investors and things are unlikely to change anytime soon. Here are a few reasons why investors love Coke so much.
The Coca-Cola Co is older than the majority of companies around today and despite only offering a few products, they’ve been growing consistently for years, averaging a 4-6% annual growth rate. Predictability is something that investors love and Coke has it in spades.
Dividends are a great way of securing regular, predictable cash. Coca-Cola currently offers a dividend yield of 2.7%, and while not the highest, this number has increased for a staggering 59 consecutive years.
Despite inflation and increasing production costs, Coca-Cola has managed to grow its revenue substantially by passing its increased costs onto the customer. During Q1, Coca-Cola reported revenue of around $10.5 billion, a 16% increase against the same period the year prior. During a time when companies are struggling to earn ample margins as a result of high costs, Coca-Cola is posting double-digit figures.
Consumers seem to be loving Coca-Cola with organic sales up 16%. Considering Coke has been steadily increasing the prices of its products, this growth is especially impressive.
The Coca-Cola Co has always focused on ensuring it has ample margins on all products, it’s one of the key ways it's able to increase its dividends year on year. Despite margins decreasing, Coca-Cola still boasts a 22% margin, substantially higher than closest-competitor PepsiCo at 14%.
Is Coca-Cola a Good Investment - Negatives
Coke, like any company, has its own unique set of risks. Here are a few reasons why it might be better to avoid the Coca-Cola Co for the time being.
Constantly increasing dividends do come at a high cost. Coca-Cola uses around 72% of its free cash flow to pay shareholders, meaning it only has a small amount to reinvest back into the business. Although it will keep investors happy, it’s likely to hinder innovation.
Coca-Cola is growing at a snail’s pace compared to other blue-chip stocks. In fact, over the last 10 years, Coca-Cola has substantially underperformed the S&P 500.
Hype Asset of the Day - Conclusion
All in all, Coca-Cola, thanks to its stability and dividends, is a great long-term investment that has minimal chance of decreasing over a multi-year period. While it’s unlikely to make you rich overnight, it would make a great addition to any risk-conscious investor’s portfolio. If you’d like to get more trending stocks sent directly to your inbox, check out our premium plans. Or alternatively, if you want to learn more about the services offered by HypeIndex, check out our FAQ page.
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