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Coca-Cola Company (KO) Dividend Stock Analysis
By: Dividends4Life   Monday, May 7, 2012 9:00 AM
Symbols: ERIE, FMX, KO, MSFT, NSC, PEP, WAG
Years to > MMA

KO earned a Star in this section for its NPV MMA Diff. of the $813. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as KO has. If KO grows its dividend at 7.5% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 3.1%. KO earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

Memberships and Peers: KO is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Dr. Pepper Snapple Group (DPS) with a 3.4% yield, Pepsico, Inc (PEP) with a 3.1% yield and Fomento Economico ADR (FMX) with a 1.8% yield.

Conclusion: KO earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks KO as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $87.25 before KO's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 50 years of consecutive dividend increases. At that price the stock would yield 2.3%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.9%. This dividend growth rate is slightly lower than the 7.5% used in this analysis, thus providing a slight margin of safety. KO has a risk rating of 1.25 which classifies it as a Low risk stock.

Coca-Cola is one of the most recognizable names in the world. KO is able to deliver products to nearly all points on the globe through an extensive direct distribution network that has few peers. Its world presence will be relied on to compensated for declining consumption of carbonated beverages in the North American market. The company's free cash flow payout is above the 60% I look for and it debt to total capital if slightly above my 45% upper limit. However, KO remains a desirable stock and I will continue to give it consideration when it is trading below my fair value price of $80.11.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in KO (2.3% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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