This Warren Buffett favorite has ample opportunities to reward shareholders for many years.
Coca-Cola (KO 0.94%) has surged to new highs this year after reporting strong earnings results. The company is seeing healthy demand for its products, and growing revenue and profits should keep the company’s 62-year streak of consecutive dividend increases going.
An outstanding business for dividend investors
Coca-Cola has been resilient in a challenging consumer spending environment. It delivered adjusted revenue growth of 15% year over year in the second quarter, driven mostly by higher selling prices. The strongest markets were Latin America and Asia Pacific, highlighting the brand’s opportunities abroad.
The stock’s current quarterly dividend payment is $0.485 per share. Coca-Cola most recently raised the quarterly payout earlier this year by 5%, bringing the forward dividend yield to 2.73%. That is double the S&P 500‘s yield of 1.32%.
Wall Street analysts expect the company’s adjusted earnings per share to be $2.59 this year, so at the current annual dividend payment of $1.94, the stock’s payout ratio is 75%. Coke has built a highly profitable enterprise supplying concentrate syrup to its bottling partners. This provides the company with ample resources to distribute passive income to shareholders while investing in more growth as well.
Management is focused on innovation to drive demand for its products, including the recent reformulation of Coke Zero Sugar in North America. Coke Zero Sugar’s sales volume grew 20% in the second quarter.
Coke stock has been a longtime favorite of Warren Buffett. The prospects for more growth in global beverage consumption, in addition to potential market share gains in international markets, point to many years of earnings growth and dividend increases.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
