Coca-Cola’s Game-Changing Plans For Growth
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Coca-Cola's 2020 Vision aims to make the company more efficient, green, and profitable with the goal of providing more value to its investors over the next decade and beyond. Let's look at Coca-Cola's current projects and how the company's current direction may be of benefit to current and future shareholders.
Coca-Cola's (NYSE: KO) profits have been on the rise over its last three fiscal years from a net of $5.8 billion in 2008 to over $11.8 billion in its last fiscal year. It has posted an average of $2.3 billion in profit per quarter over its last three quarters, and if its fourth quarter earnings of over $5.7 billion last year are any indicator of its future result, it may finish at or ahead of its previous year's profit of $11.8 billion this year. In my opinion, Coca Cola's 2020 Vision is a road map to future success through increased efficiency and projects that promote positive public relations.
Coca-Cola plans to reduce its overall carbon footprint by 15% by 2020, and it is seeking ways to replenish the water that it uses to produce its products. Its water stewardship program has successfully increased the amount of water it has replenished from 23% in 2005 to an estimated 96% in 2011. Its devotion to giving back clean and drinkable water is only one of its current initiatives that are centered on becoming an environmentally friendly company.
In 2007, Coca-Cola partnered with the World Wildlife Fund, a conservation organization dedicated to restoring our tropics and protecting endangered species against the intrusion of mankind on their habitats. Through Coca-Cola's partnership, the World Wildlife Fund hopes to protect natural water sources such as in the basins of the Mekong River and the Rio Grande. Coca-Cola also partnered with the International Federation of the Red Cross and Red Crescent Societies to deliver aid to the victims of the tsunami in Japan last year as well as to flood victims in the United States.
Coca-Cola has also made strides toward providing healthier products to consumers who are becoming more health conscious. It has reduced the number of calories in its products by almost 10% over the last decade and is currently looking for ways to continue providing healthier products in an effort to compete with the similar initiatives of PepsiCo (NYSE: PEP) and the Dr. Pepper Snapple Group (NYSE: DPS). Its Full Throttle Energy Drink line also positions the company in the rapidly expanding energy drink market.
PepsiCo is the second largest beverage provider behind Coca-Cola, but PepsiCo derives around 50% of its profit from the food market and is not a global threat to Coca-Cola, which maintains a much leaner and efficient global distribution network. PepsiCo saw revenue growth last year of 11% compared to Coca-Cola's growth of 5%, but it still trailed Coca-Cola overall with a profit of $6.3 billion. The Dr. Pepper Snapple Group is a solid competitor in North America, but does not have the global reach to threaten Coca-Cola, which receives 70% of its profit from outside of the United States.
Coca-Cola stock has grown in value over the last three years at a steady rate, making a move from $41 per share three years ago to rest at $69 currently. I believe it will continue to rise over the next decade as Coca-Cola continues to work toward the goals outlined in its 2020 Vision. One of the key goals in its vision is to provide additional value to shareholders and I believe that we will witness increases in its dividend over the years to complement its rise in stock value.
In the first quarter of 2012, Coca-Cola increased its quarterly dividend from $0.47 per share to $0.51 to provide a total of $2.04 per share over the last four quarters and a 3% yield. It pays out at a ratio of 0.55, which shows that it is committed to giving back to its investors now and in the future. I believe that its dividend will grow over the next decade with its stock value, making this a perfect investment for income investors who are looking for a reliable long term position.
As Coca-Cola continues its effort to become a leaner and more efficient company that provides healthier options to its consumers, I believe that the sky is the limit for its potential. I don't believe that this investment will provide windfall returns, but I believe that it is dependable and consistent and it is sure to reward investors through dividend payouts and long-term growth.
Motley Fool newsletter services recommend The Coca-Cola Company and PepsiCo. The Motley Fool owns shares of The Coca-Cola Company and PepsiCo. StockCroc1 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.
