In part 2 of this special report, Ben Reynolds — editor of Sure Passive Income — looks at The Coca-Cola Company (KO), one of the initial stocks recommended in the new advisory service.
Coca-Cola is one of the largest beverage companies in the world. Its products are sold in more than 200 countries globally, with over 500 individual brands in the company’s portfolio. Coca-Cola has a portfolio full of category-leading brands in both sparkling and non-sparkling beverages.
Just a few of its premier brands include Coca-Cola, Diet Coke, Sprite, Dasani, Minute Maid, Simply, Gold Peak, Honest Tea, and many more.
Coca-Cola’s dividend payout is extremely safe, even in a severe recession, largely due to the company’s brand portfolio. Coca-Cola products are consumed every day by millions of people, even during recessions, which adds a margin of safety.
Coca-Cola’s large and diversified product portfolio (it has 20 brands that each collect at least $1 billion in annual revenue) provide it with steady demand each year.
Even in 2020, a highly challenging environment, Coca-Cola continues to report steady results. Adjusted earnings-per-share declined just 2% in the third quarter, as the coronavirus pandemic led to a 4% drop in global case volumes.
Coca-Cola’s operating margin actually improved to 26.6% for the quarter, from 26.3% in the year-ago period. The company’s ability to keep margins afloat helps it to remain highly profitable, even in a difficult climate.
Going forward, Coca-Cola has the potential to return to growth, as the global beverage industry still offers opportunity. Soda consumption has declined in the U.S. for over a decade, which is a lingering headwind.
But Coca-Cola is responding by investing in adjacent categories such as coffee. For example, Coca-Cola acquired Costa in a $4.9 billion acquisition, which gave it instant exposure to coffee, a growth market.
Coca-Cola stated at the time of the acquisition that the global coffee market was growing at 6% per year, and Costa has operations in more than 30 countries around the world. Coca-Cola stock yields 3.3%, and the company has increased its dividend for 58 consecutive years.
