Is The Coca-Cola Co (NYSE:KO) A Good Dividend Stock under the New CEO?

October 24, 2017, 12:56 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

James Quincey, the new CEO of The Coca-Cola Co (NYSE:KO) has been steering the giant soda maker in a different direction ever since he took over. Quincey’s leadership abilities were evident during the time he was president of the company’s European operations and recently when he was the company’s chief operating officer.

Article Summary

Coca-Cola’s new CEO is steering the company in the right direction.

The company has increased its dividend annually over the past 55 years.

The company is expanding into numerous international markets.

Here’s the trading report on KO.

The company’s stock rallied higher after it announced in December 2016 that Quincey would be taking over from the then CEO Muhtar Kent on May 1, 2017. Quincey has articulated a new vision for the company as a “total beverage company,” which is part of the Coke’s overall turnaround strategy.

Coca-Cola’s main global competitor is PepsiCo, Inc. (NYSE:PEP), which also executed a similar turnaround strategy a few years ago with some level of success. However, Coca-Cola is more expensive than PepsiCo given that it currently trades at a P/E ratio of 48.52, while Pepsi trades at a P/E ratio of 23.06.

The company has increased its annual dividend 55 consecutive times in the past, regardless of the market conditions facing the company. The company’s management is committed to returning capital to investors, which is a strong guarantee that the company shall continue paying dividends to shareholders over the long-term.

The changing societal values towards a more health-conscious society has led to declining sales of Coca-Cola products in most developed countries as consumers prefer to drink healthy beverages. The company has been forced to expand into new international markets, especially in developing countries, where the demand for its carbonated drinks is still high.

The company has also launched new beverage offerings that are largely targeted at health-conscious consumers in order to attract consumers who had abandoned the company’s popular carbonated drinks. In his efforts to transform Coca-Cola into a total beverage company, Quincey has steered the company towards the production of non-sugary products such as Coke Zero and Coke Light.

Coca-Cola recently won a small victory in the form of the repeal of sales tax on sweetened sodas in Chicago. This was a major victory for the company as it fights against regulations imposed by government targeted at reducing the consumption of carbonated drinks.

The future of Coca-Cola is filled with opportunities and several headwinds, but the question remains whether it’s a good dividend stock at its current valuation.

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