Beverage company Coca-Cola (KO 0.01%) reminded Wall Street last week why it's such a beloved holding for so many dividend investors. The company, which operates about 200 brands worldwide (including its namesake Coca-Cola products), has a long history of robust dividend payments to shareholders. Impressively, this history includes more than six decades of consecutive annual dividend increases.
Coca-Cola announced its 61st consecutive annual dividend increase last week, making the already attractive dividend stock a bit more compelling for its shareholders.
NYSE: KO
Key Data Points
Here are three reasons investors should love Coca-Cola's dividend.
1. Dividend growth
Coca-Cola announced last Thursday that it is raising its quarterly dividend by almost 5% to $0.46. With more than six decades behind it of consecutive annual dividend increases, the company has proven to be incredibly resilient.
Its reliable and consistent annual dividend increases have come despite all sorts of major macroeconomic challenges in the U.S. during this time frame, including recessions, terrorist attacks, pandemics, several periods of high inflation, various tightening and expansionary cycles from the Federal Reserve, and more. Nothing seems to be able to stop Coca-Cola from providing its shareholders with dividend growth.
The company's dividend has become ingrained in Coca-Cola's DNA. Management regularly tells investors that its capital allocation priorities are to prioritize both reinvestment into the business to drive long-term growth and dividend growth to shareholders.
2. A robust dividend yield
Coca-Cola's investors benefit from a meaningful dividend yield. The company's quarterly dividend of $0.46 translates to $1.84 annually, giving the stock a dividend yield of about 3%. Showing just how meaningful this dividend yield is, it's substantially higher than the average dividend yield of about 1.7% for stocks in the S&P 500. This strong dividend yield gives shareholders a nice stream of cash flow -- something that is particularly valuable during periods of high inflation, as investors look for ways to offset higher prices.
To fully appreciate how much the company is giving away to shareholders in dividends, consider the annual payout in absolute terms. In 2022, Coca-Cola paid a total of $7.6 billion in dividends to its shareholders. It has paid nearly $77 billion in dividends since the beginning of 2010.
3. Consistent earnings growth
Finally, while there's some inevitable year-to-year volatility in the company's earnings growth, Coca-Cola has been able to consistently grow its earnings over the long term, thanks to management always following through on its priority to reinvest in its business for long-term growth. For instance, even though Coca-Cola's 2022 earnings per share of $2.20 is down slightly from $2.26 in 2021, it's up substantially from $1.51 in 2018.
Analysts on average expect more earnings-per-share growth from Coca-Cola over the next five years. Given the company's long history of growing its sales and profits, more growth is likely. This growth, of course, should flow through to the company's dividend in the years ahead as the company continues to prioritize the quarterly cash payout investors have come to expect.
Coca-Cola's first dividend at its new rate is payable on April 3 to shareholders of record as of March 17, management said in its press release about the dividend last week.
