2 New Reasons To Buy Coca-Cola

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The only problem with Coca-Cola (NYSE: KO) stock is that its huge name and reputation make it a very popular investment option.

One major reason for the company’s success is that it enjoys huge brand awareness around the world. The company has successfully penetrated markets from New York City to Manila, Indonesia and everywhere in between. Part of Coca-Cola's success is due to its partnerships with other businesses. For example, Coca-Cola is served in McDonald's (NYSE: MCD) restaurants, another global powerhouse, worldwide. Whether Coca-Cola needed to use partnerships such as one with McDonald's to penetrate new global markets is debatable, but one thing is certain: it has helped increase demand for products, which has in turn increased profits.

Coca-Cola is sure to see more profits from its partnership with McDonald's, as McDonald's was recently awarded the status of the official restaurant of the London Olympic Games. The diversity of its branding and marketing strategies, which are customized to meet the cultural and regional specifications of each market in which the company has inserted itself, as well as the sheer number of markets in which it has successfully introduced its products, makes Coca-Cola a difficult investment option to beat.

Coca-Cola has been one of the only stocks to raise distributions 50 years in a row. The stock has a dividend growth rate of 10% per annum, with a yield of 2.80%. Shareholders recently received welcome news. Quarterly dividends were increased from $0.47 per share to $0.51 per share, or a total of $2.04 per share over the past three quarters. One share is currently worth about $77, near its 52-week high of $77.82.

Despite Coca-Cola’s global brand appeal and market penetration, the company is making plans to become more efficient, profitable, healthy and green by 2020, thus providing more efficiency. Higher efficiency translates into value for product for investors, and is positive for public relations with the general public. These improvements are especially welcome news as the company continues to increase profits, which reached $11.8 billion last year and posted an average $2.8 billion in profit each quarter in the last three quarters. With these new initiatives, shareholders can look forward to even higher profits.

While Coca-Cola’s plans are by no means overly ambitious- they include a 15% reduction in carbon footprint, reusing water used in manufacturing processes and partnering with the World Wildlife Fund, they continue to make Coca-Cola the most efficient soft drink manufacturer in the world. The company has made and continues to make efforts to appeal to more health-conscious customers, cutting the calories in its products by 10% over the past decade. Although competitors such as Pepsico (NYSE: PEP)Dr Pepper Snapple Group (DPS), Kraft Foods (KFT) and Monster Beverage (MNST) have worked to compete in both efficiency and marketing of healthier products, none of them have been able to penetrate the global market as deeply as Coca-Cola.

Although Pepsico, Coca-Cola’s largest competitor, grew at an astonishing 11% last year, compared to Coca-Cola’s 5%, it still raked in a profit of only $6.3 billion, compared to Coca-Cola, which had final quarter profits of $5.8 billion alone. Therefore, investors may still flinch from Pepsico stock, preferring what may be viewed as Coca-Cola’s safer stock. That being said, Pepsi recently announced that it would inject an additional $550 million to its marketing and advertising budget in an effort to stimulate soft drink sales, which have declined an average of 7.5%. Of course, Pepsi makes about 50% of its profits from the food market rather than soft drinks, making it somewhat different of an investment option to Coca-Cola, which focuses rather exclusively on non-alcoholic soft drinks.

Coca-Cola is a pretty safe bet for investors looking to keep value in their portfolio without taking too big of a risk. The move for leaner systems and healthier products is sure to make the profitability of the company, and the value of its stock, increase in the next few years. While competitors such as Dr. Pepper and Pepsico are doing well, too, one should keep in mind that these companies are no where near as popular on a global scale as Coca-Cola, nor do the companies have the efficiency mechanisms in place that Coca-Cola does. Indeed, the only issue with purchasing Coca-Cola stock, it would seem, is being perceived as jumping on a bandwagon that is already very large, very popular and already overly full.

BobbyFisher has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.

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