Coca Cola: Dividend Stock Analysis

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company is member of the S&P 500, Dow Jones Industrials and the S&P Dividend Aristocrats indexes. Coca-Cola has paid uninterrupted dividends on its common stock since 1893 and increased payments to common shareholders every year for 48 years. One of the largest holders of Coca-Cola stock is no other than the Oracle Warren Buffett, who is the chairman of Berkshire Hathaway (BRK.A) and one of the best investors in the world.

Over the past decade this dividend stock has delivered an average total return of 3.60% to its shareholders. The stock has largely traded between $65 and $40 over the past decade.

The company has managed to deliver a 14.30% average annual increase in its EPS over the past decade. Analysts are expecting an increase in EPS to $3.45 for 2010 and $3.76 by 2011. This would be a nice increase from the 2009 earnings per share of $2.93. Future drivers for earnings could be the company’s tea, coffee and water operations. Cost savings initiatives could also add to the bottom line over time, as well as increases in volumes in emerging markets such as China.

The acquisition of Vitaminwater in 2007 has increased growth in the company’s non-soda business, which is where Coke lags behind PepsiCo (PEP). The acquisition of CCE’s North American bottling business, should bring in sufficient cost savings for the company’s North American supply chain, which would result in increase in cash flows. The deal is expected to deliver approximately $350 million dollars in cost savings over the first four years of implementation. In addition to that, it will bring more control over North American operations, deliver more flexibility in the company’s strategy implementation and reduce conflicts over the product mix with bottlers.