The lull between quarterly earnings releases is often a good time for investors to pick up shares of undervalued stocks -- and Coca-Cola (KO 0.76%) looks like a tasty bargain now. Even as it has slightly outperformed the bellwether S&P 500 index so far this year, the share price doesn't reflect its generous dividend or continuing potential for fundamental growth.
I'd say that one consistent habit from the beverage giant also nicely enhances the stock's potential.
Always be beating
Coke hasn't yet set an official date for its third-quarter release, but given the timing of previous ones we can assume this will happen around Oct. 22.
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What's giving me more hope for the company is its recent track record -- in every reported quarter over the past year, it has beaten the consensus analyst estimate for profitability. Now, with a company as large and well-analyzed as Coke, we're not talking monster bottom-line-crushing victories here.
Yet there's an impressive streak of beats -- $0.87 per share (under non-GAAP, or adjusted, standards) in the most recent quarter versus the analyst consensus of $0.83. This was preceded by $0.73 reality against an average $0.71 expectation, $0.55 versus a $0.52 estimate, and $0.77 against a predicted $0.75.
Meanwhile, Coke is still managing to squeeze out growth after all these years, which is hard to do given its size, sprawl, and the fact that it's available in every conceivable market on this planet. In its most recently reported quarter, adjusted revenue ticked up by 2% year over year and adjusted net income rose at a 4% clip.
King of the beverage sector
And of course, with this most classic of income stocks, there's the dividend. Not only is Coke a Dividend King that reliably hikes its payout every year, it's generous with that profit sharing. At the moment, its dividend yield is only slightly under 3%, nearly 3 times the percentage of the average of S&P 500 index companies. I'd go so far as to say it's one of the best dividend stocks available.
