Coca-Cola (KO) Raising Dividends Again
We may earn money or products from the companies mentioned in this post.
When was the last time your employer gave you a 5+% raise?
Even if you got a raise like that this past year, I doubt you get that kind of pay increase every single year. If you do … then great!
But if you are like most hard working people … you probably are not getting a consistent pay raise above 5% or 6% annually.
The good news is that there is a way to put your family in a position to grow your income by 6% or more every 12 months.
How is this possible? By building a portfolio of stocks from the top dividend paying companies.
Our family has been building our dividend growth portfolio for almost 9 years now. Just this year … we are expecting to earn about $2,400 in dividend income!
Building that kind of income stream definitely takes time and some help from the companies that you are investing in. That help comes in the form of annual dividend increases.
The most recent dividend increase (or raise) from a stock we own was from Coca-Cola (KO).
KO Shareholders Get a 5.7% Raise
Coca-Cola (KO) recently announced an annual dividend increase. The company has been consistently raising annual dividends for over the past 50+ years!
That is incredible to think the company has helped their shareholders increase their income for that long of a time.
Company shareholders will now receive $0.37 in quarterly dividends for each share they own … instead of $0.35 paid previously. This increase comes close to meeting our desired dividend growth rate of at least 6%, but fell just short.
The latest increase bumps the annual dividend for KO up to $1.48 per share compared to $1.40 last year.
Overall, that is a 5.71% increase in dividend income.
How Much Extra Income?
We currently own 15.28 shares of KO in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for KO up to $22.62, compared to $21.39 last year.
That is an annual dividend income increase of $1.22 – (not much but it is an increase to our income).
This is a simple reminder that our dividend income stream is constantly growing every single day … without any extra work from us.
With this latest increase by Coca-Cola, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,294.37.
Dividend Growth for KO
We have owned shares of Coca-Cola for about 3.5 years now.
Overall, the company has done a decent job with dividend growth … but it has come at an expense – a high payout ratio.
Take a look at the annual dividend payments since 2012 –
- 2012 – $1.02
- 2013 – $1.12
- 2014 – $1.22
- 2015 – $1.32
- 2016 – $1.40
- 2017 – $1.48 (projected)
Note – The 2017 dividend has been adjusted to reflect a projected dividend over the entire year.
As you can tell from the numbers above, KO dividends have been raised consistently over the past several years with healthy growth.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. Coca-Cola has been able to sustain a dividend growth rate above 6% for some time now … coming up just short this year.
Unfortunately though … that growth has also pushed their payout ratio (84.85%) well above 60%, which is the maximum that we consider for our portfolio.
Here are a few average growth rates for shares of Coca-Cola –
- 1 Year DGR – 5.71% (2016 to 2017)
- 3 Year DGR – 6.67% (2014 to 2017)
- 5 Year DGR – 7.74% (2012 to 2017)
Coca-Cola – Buy, Sell, or Hold?
We started buying shares of Coca-Cola back in November of 2013.
Since that time, we have earned $51.43 in dividends from the company. Since we own these shares in our LOYAL3 account, there is no option for DRiP – therefore no additional shares have been earned from dividends.
Note – Even though we don’t have DRiP for our KO shares, we have used our dividends to fund other purchases.
Here are a few stats from over the years of buying stock in Coca-Cola –
- Total Investment – $625.00
- Shares Purchased – 15.28
- Dividends Earned – $51.43
- DRiP Shares – 0.00
At the time of this writing, KO does NOT meet our stock screen criteria based on the following metrics –
- Current Yield – 3.37%
- Payout Ratio – 84.85%
- P/E Ratio – 25.19
The company meets the current yield requirement of being greater than (or equal) to 2%. But the payout ratio is way above the 60% maximum we look at for a dividend growth stock. In addition, the PE is well over 20 and the dividend growth rates are not that strong.
Based on all of this, we have KO as a solid HOLD. If at anytime, the company were to cut their dividend … we would sell our shares immediately.
We plan to invest in Dr. Pepper Snapple (DPS) now in place of Coca-Cola… as their dividend characteristics look much better.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – DPS and KO. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.