Investors tend to generate wealth by reselling their earlier purchases. More so, to maximize profits, they usually do so once their stock’s prices have risen. But truth be told, it does take a while for the average stock to reach such a point.
In essence, patience is key when investing. But that’s not something that everybody can spare all the time. It is for those reasons that investors worldwide have taken to dividend investments as an alternative.
Not only do they deliver decent capital every month, but they also tend to be more mature and successful than the average stock. That being said, one of the world’s most well-known dividend stocks is Coca-Cola (NYSE:KO). Without any doubt, it fits the description just right.
When considering that Coca-Cola is now selling at reasonable prices, it begs the following question. Is it the right buy for you?
Coca-Cola has an exemplary business reputation
Coca-Cola deals with a great portfolio of beverages. We are talking about some pretty famous brands that speak for themselves. This alone gives Coca-Cola a staggering competitive advantage.
In retrospect, this might be one of the reasons why it manages to operate in the long run without struggle. Even during the harsh financial year of 2020, the company still managed to generate a cash flow of $11.5 billion.
For those unfamiliar with the nature of cash flows, they allow for:
- Dividend payments
- Repurchase of their own stocks
- Debt payments
- Short-term investments
- And more
To simply put it, keeping up with a strong cash flow is always important. More so for investors, as this opens the door for desirable dividend payments.
Aside from its popularity, Coca-Cola makes this possible due to an admirable business model. To give you a better idea of its success rate, it managed to generate a pre-tax income of 24.2% in-between 2011 and 2022.
For reference, its main rival PepsiCo saw a percentage of 13.3% under the same conditions.
Summing things up, Coca-Cola is the sort of company that is more than capable of delivering strong dividend payments. Additionally, they’re more than capable of increasing them as time goes by.
Should I buy Coca-Cola stock today?
Potential investors should know that Coca-Cola’s income does not come exclusively from its beverages. It gets a similar-to-higher amount of money out of its advertisements.
Under normal circumstances, you could see a Coca-Cola advertisement everywhere. From restaurants to stadiums, from theatres to theme parks. Sadly, these ventures came to a temporal halt with the arrival of the COVID-19 pandemic.
As expected, this lowered the company’s revenue for a while. When contemplating the year 2020, it went down by a solid 11.4%.
Fortunately, with the economy reopening right as we speak, we should expect the company to return to its former glory in no time. After all, its business model does remain the same, so it should be a piece of cake.
This earlier decrease might turn out to be a blessing in disguise. In reality, it’s an opportunity to buy Coca-Cola stock at lower prices. For those lucky enough to grab some of its stocks, it will represent a price-to-free cash flow ratio of 20.
Our personal opinion? You can’t get something better than that right now.