Dividend Stocks

Coca-Cola Dividend History and Safety

Some of the world’s best investors stick to dividend portfolios. They know that a steady stream of income is a top wealth-building strategy. And finding the best deals is key. So today, we’re going to review another one of the best dividend stocks around. Let’s take a look at Coca-Cola’s dividend history and safety.

Before we dive into Coca-Cola’s business, you might also be interested in our investment calculator. It’s free to use, and it shows how big your portfolio can grow over the years.

Coca-Cola Business Overview

Coca-Cola (NYSE: KO) is a $199 billion business. The company is based out of Atlanta, Georgia, and it employs 86,200 people. Last year Coca-Cola pulled in $37 billion in sales, and that works out to $432,000 per employee.

The company is a beverage giant and maintains a solid credit rating (A+) from the S&P. This allows Coca-Cola to issue cheap debt to expand operations and finance other initiatives.

In the last few years, Coca-Cola has acquired Costa Coffee, Moxie and a few other brands. The company has a big network to market these brands further. This should help push sales a little higher and result in more cash flow to pay shareholders…

Coca-Cola Dividend History

Coca-Cola paid investors $0.88 per share a decade ago. Over the last 10 years, the dividend has climbed to $1.60. That’s an 82% increase, and you can see the annual changes below…

Coca-Cola dividend history annual per share 2010-2019

The compound annual growth is 6.2% over 10 years… but over the last year, the dividend climbed 2.6%. Although the slowdown in dividend growth isn’t a great sign, Coca-Cola still might be a good income investment. Let’s take a look at the yield…

KO Current Dividend Yield vs. 10-Year Average

Coca-Cola’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital, and we’ll look at that soon.

The dividend yield comes in at 3.54%, and that’s above the 10-year average of 3.06%. The chart below shows the dividend yield over the last 10 years…

KO dividend yield history 2010-2019

The higher yield shows that investors have bid down the company’s market value. That makes sense after the recent market drop. But if things continue to rebound, investors will see the yield drop again and capital gains climb. Generally, the dividend yield is mean reverting with changes in share price.

Dividend Safety Payout Ratio

Many investors look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that for every $1 Coca-Cola earns, it pays investors $0.60.

The payout ratio is a good indicator of dividend safety… but accountants manipulate net income. They adjust for goodwill and other noncash items. A better metric is free cash flow.

Here’s Coca-Cola’s payout ratio based on free cash flow over the last 10 years…

ko dividend payout ratio free cash flow history

The ratio is fairly steady over the last 10 years, and the trend is up. It was above 100% in 2017 and 2018. That’s not great, but it has come back down to 81.3%. Still, this doesn’t give much wiggle room for Coca-Cola’s board of directors to raise the dividend.

Even with a higher payout ratio than 10 years ago, Coca-Cola is in a good position. With a long history of payouts, it’s unlikely to cut the dividend anytime soon. Coca-Cola is one of 20 top consumer staples stocks.

Coca-Cola’s dividend history is solid, along with the other consumer staples stocks. And that’s just the tip of the iceberg. To find more income opportunities, you can sign up for our free e-letter below. It’s packed with insight from investing experts. Whether you’re a new or more experienced investor, you’ll find useful information.


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