Should one Consider Purchasing, Selling, or Maintaining Investments in Coca-Cola?
Coca-Cola (KO) might just be the polarizing pick for investors in 2024. Old-timers can't get enough of its dependable business, generous dividends, and dividend growth that has been a constant since 1961. New investors, however, may be turned off by its leisurely growth pace.
So, is Coca-Cola stock worth snapping up this summer? It all depends on your investment style and expectations.
Embrace Coca-Cola's long-standing love for shareholders
The reasons behind Coca-Cola's enduring popularity among long-term investors are undeniable. The business is simple, cash profits roll in, and dividends are shared generously with investors. In fact, Coca-Cola has been distributing dividend checks every quarter for an astounding 63 years, and increases have been demonstrated annually.
If you've held onto your Coca-Cola stock since childhood, sit back and let that dividend income work its magic! The more years you've invested, the more that effective dividend yield climbs. For instance, legendary investor Warren Buffett bought his first Coca-Cola shares in 1988 and never looked back, amassing a $1.3 billion profit and a $776 million yield in 2024.
But what about new investors?
You'd think it's too late to hop on the Coca-Cola train, right? Not so fast. While Coca-Cola's growth rate may not be mouthwatering, a hesitant 5.7% compound annual growth rate (CAGR) over the last five years, it's a highly reliable business. A small hiccup, like, say, a global pandemic, might lead to a temporary dip, but Coke quickly rebounds. After all, consumer whims can be unpredictable, but Coca-Cola always seems to have a winning drink attracting attention.
Beyond classic brands like Coca-Cola, Sprite, and Fanta, Coca-Cola has other market winners in its roster, from health-conscious Dasani water to the jolt of energy you get from Monster Beverage beverages, to which Coca-Cola has a distribution partnership.
Verdict: Coca-Cola might not be a buy-now wonder
So, should you buy Coca-Cola stock today? It really depends if you are looking at it through a long-term or short-term lens. While loyal investors will undoubtedly hold onto their Coke stocks and add to their positions, others seeking a quick profit may wish to look elsewhere.
True, Coca-Cola isn't trading at a steal at the 29 times earnings and 34 times free cash flow, as per current valuations. But, its legacy and financial strength imply it's not going anywhere in the foreseeable future. So don't dismiss Coca-Cola entirely. If prices go down, it might just be a fine time to join in on the fun and collect those steady, tasty dividends in the long term.
If you're a new investor looking to allocate money in finance, Coca-Cola's stable performance and consistent dividends might make it an attractive choice. With a history of distributing dividends every quarter for 63 years and annual increases, Coca-Cola offers a reliable source of income.
However, while considering investing in Coca-Cola, it's essential to consider its growth pace. Although its growth rate may be lower compared to some other companies, Coca-Cola has demonstrated a high level of resilience and has consistently bounced back from temporary dips.
