Coca-Cola (KO -0.83%), the world's largest beverage company, will post its second-quarter earnings report on July 28. Analysts expect its revenue and adjusted EPS to rise 4% and 7%, respectively, year over year. That growth should be driven by its market share gains in Asia and Latin America, robust sales in North America, the strength of its non-soda drinks, cooling inflation, and its supply chain optimization efforts.
During its first-quarter report on April 28, Coca-Cola predicted its organic revenue would rise 4%-5% for the full year, while its comparable EPS would grow 8%-9% (6%-7% on a constant-currency basis). It didn't provide an exact outlook for the second quarter, but it predicted the currency tailwinds would boost its organic revenue and comparable EPS.
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That outlook seems bright, but there's another simple reason to load up on Coca-Cola's stock before its next earnings report: it's a Dividend King with an evergreen business model.
Why is Coca-Cola an "evergreen" Dividend King?
A Dividend King is a company that has raised its payout for at least 50 consecutive years. Coca-Cola is part of that elite club because it's raised its dividend annually for 64 consecutive years, even as the world endured five global recessions. It currently pays a forward yield of 2.6%, and its low trailing payout ratio of 65% gives it plenty of room for future dividend hikes.
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Coca-Cola supports its dividends with an evergreen business model. It only sells the concentrates and syrups for its beverages, while its independent bottling partners produce and distribute the finished drinks. That asset-light model enables it to maintain high operating margins while generating ample cash for dividends and buybacks.
Over the past few decades, Coca-Cola expanded its portfolio to include bottled water, teas, fruit juices, energy drinks, sports drinks, coffee, and even alcoholic beverages to reduce its dependence on sugary sodas. It also refreshed its classic sodas with smaller serving sizes, healthier versions, and new flavors.
That scale and diversification make Coca-Cola a safe stock to hold in bull and bear markets. It has a wide moat, plenty of ways to counter inflation and other macroeconomic shocks, and will continue to grow as it leverages AI to optimize its inventory, consolidate its bottling network, and expand its lineup of higher-growth dairy, energy, and sugar-free drinks. Coca-Cola might seem like a boring blue-chip stock, but that's exactly why it's worth buying in this frothy and turbulent market.
