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Should You Buy The Coca-Cola Company (KO)?

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There’s no denying that The Coca-Cola Company (NYSE:KO) is an iconic American company. The soda juggernaut, which counts Warren Buffett among its financial backers, is a corporate legend in its own right. The company has a history that stretches back more than a century, and the company’s products can be found in over 200 countries worldwide.

The Coca-Cola Company (NYSE:KO)

At the same time, the world is a different place than when Coca-Cola built its empire, and its inhabitants are changing the way they think about food and beverages. In that light, can The Coca-Cola Company (NYSE:KO) continue to compete in an environment of shifting consumer habits?

A brilliant past, but trouble lurks ahead

Coca-Cola’s remarkable past represents the pinnacle of corporate success. The Coca-Cola Company (NYSE:KO) has served its customers and investors alike for many decades. To illustrate, consider that in February this year, the company increased its dividend for the 51st consecutive year.

This kind of streak can only be accomplished with an incredible financial track record. Last year, Coca Cola (NYSE:KO) achieved 3% growth in net operating revenues year over year. This came on the back of 4% global volume growth for the full year, and 6% full-year reported earnings per share growth.

Of course, no discussion of the soda companies is complete without mentioning close rival PepsiCo, Inc. (NYSE:PEP), which has a fantastic history of its own. In April, Pepsi increased its own dividend for the 41st year in a row.

Pepsi, like Coca-Cola, displayed resilient 2012 results, in which the company realized 5% organic revenue growth in both the fourth-quarter and the full-year. Earnings clocked in at $4.10 per share for the full year.

In addition, there exists a smaller industry player in Dr Pepper Snapple Group Inc. (NYSE:DPS), which pays a slightly higher dividend than its rivals, at 3.25% annualized.  Dr Pepper Snapple Group Inc. (NYSE:DPS) is a strong dividend grower, increasing its first-quarter 2013 shareholder payout by 12%.

Dr Pepper Snapple Group Inc. (NYSE:DPS) holds a $9 billion market capitalization, meaning it is a large-cap stock, but the company’s size pales in comparison to its two rivals which both carry market values in excess of $100 billion. The company also trades at a more attractive 15 times trailing earnings, which compares favorably to the P/E multiples on The Coca-Cola Company (NYSE:KO) and Pepsi, which both exceed 20 times.

Times are changing

The Coca-Cola Company (NYSE:KO) has a truly amazing history. The more pressing question for investors, however, is what the future holds. Coca-Cola still has a strong tailwind in the form of international growth. To that end, it’s worth noting the company realized 4% international volume growth last year, far better than the 1% volume growth from North America. It’s safe to say people will be drinking Cokes for a long time, which means investors can count on that 2.7% dividend yield and will likely continue to receive annual percentage dividend increases in the high-single digits.

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