At the beginning of this month we received a small check from Coca-Cola (KO) in the amount of $39.80 (35 cents X 113.714 shares). This is the third dividend payment in a row without an increase so we’re expecting a raise in the next payment. We say expecting because they don’t necessarily have to raise the dividend for quite a while before their dividend champion status is threatened. We gave a good example of this when we discussed why Chevron hasn’t given a dividend raise for 10 payments in a row and yet they still haven’t lost their dividend champion status. Here’s why we’re not expecting much from KO in the near term:
As you can see, their payout ratio is quite high at 80% though it’s not the first time they’ve seen these levels. If we look at their historical dividend increases over time, we can see that KO has been providing pretty consistent raises over the past 10 years:
What is important to realize about KO is that they don’t just sell soda. KO sells an entire range of billion dollar brands ranging from teas, fruit juices, sports drinks, etc. The whole “people aren’t drinking so much soda” argument just doesn’t work for KO. These guys have their paws in literally every single beverage distribution chain there is, so you can be assured that they will continue to sell whatever beverages consumers prefer.
As for our position, we’re buying $140 worth of shares per month for the next 56 months in order to hit our target position size of $13,333. There really isn’t a whole lot to do with this position except re-evaluate the Q-Score every now and then to compare it against industry peers. Q-Scores are an objective way to compare stocks within any particular sector to gauge the likelihood of future dividend increases. They also serve to uncover any chronic problems with dividend growth potential so you can use them as a tool to spot trends over time.