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Coca-Cola Serves Up Attractive Dividend Growth

We expect the beverage maker to generate high single-digit growth over the next decade.


Sonia Vora: Coca-Cola is one of the most attractive dividend stocks in the beverage space, with a yield above 3%. The company has increased its dividend for the last 55 years, and its payout ratio has averaged above 60% over the last decade, indicating its commitment to returning cash to shareholders. We expect its dividend will average high single-digit growth over the next decade, which is comparable to its historical rate.

We think Coca-Cola's ability to return excess cash to shareholders partly reflects its wide economic moat, which has helped it generate excess returns on invested capital despite a decade of volume declines in the domestic carbonated soft drink market. The firm possesses substantial brand intangible assets, as its investments in product innovation and marketing have helped establish Coca-Cola as one of the most recognizable brands in the world, allowing for entrenched retail relationships and brand-loyal customers. We also believe the firm enjoys cost advantages stemming from economies of scale in beverage production and its unparalleled global distribution network.

Sonia Vora does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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