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Wal-Mart Stores, Inc. (WMT), The Coca-Cola Company (KO): Stocks with Bond-like Qualities

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Bonds are generally considered to be safer than stocks. Bonds are usually tied to company assets and creditors are generally higher up the food chain than ordinary shareholders when it comes to company liquidation and asset disposal. Having said that, there are some companies on the market with stocks that come with bond-like qualities, like The Coca-Cola Company (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT), Exxon Mobil Corporation (NYSE:XOM) and American States Water Co (NYSE:AWR). The bond-like qualities of these companies are their size, sustainable dividend payouts, histories and fiscal prudence.

The Coca-Cola Company (NYSE:KO) has a gearing — gearing is total debt dividend by shareholder equity — level of around 50%, however, interest costs were covered 24 times by EBIT at during the first quarter of this year. The company’s dividend payout is covered more than twice by operating cash flow indicating that the company’s sales would have to fall around 50% before the payout came under pressure — this would equate to nearly $6 billion a quarter, the same as the company’s total sales volume of Diet Coke. The Coca-Cola Company (NYSE:KO) has been paying a dividend consistently since 1920 and an investment in the company made 30 years ago would have returned 2515% to date.

Wal-Mart (WMT)Wal-Mart Stores, Inc. (NYSE:WMT) is one of the biggest companies in the world and operates in a highly defensive industry. With sales nearing the half a trillion mark, the company attracts some of the best business managers in the world. Wal-Mart is not going to fail anytime soon. Wal-Mart has a high level of gearing at 60% but interest costs were covered 13 times by EBIT during 2012 and debt has been growing sustainably, no faster than EBITDA. Moreover, Wal-Mart Stores, Inc. (NYSE:WMT)’s total dividend payout is covered five times by net operating cash flow, indicating that the company’s income would have to fall 80% before the payout came under pressure. In addition, the company has been maintaining and increasing its payout every year for the last 38.

Exxon Mobil Corporation (NYSE:XOM) is the biggest company in the world and unlike Apple Inc. (NASDAQ:AAPL), which briefly overtook Exxon as the largest last year, Exxon is going to keep the crown. One of Exxon’s key strengths is the fact that it’s boring, as result, the company’s shares are stable. Exxon has a very low level of gearing, at only 8% of equity; this means that the company’s financial position looks better than that of most company bonds. Furthermore, Exxon’s net operating cash flow totaled $56 billion during 2012, which covered the dividend payout 5.6 times. Investors could be worried that Exxon’s falling production from ultimately a finite asset will at some point in the future affect cash flows. However, the company’s production would have to fall more than 50% before cash flows came under significant pressures. Exxon Mobil Corporation (NYSE:XOM) has been paying and increasing its dividend payout every year for the past 30 years. The company has been around in some form since the beginning of the last century and dividends have always flowed to stakeholders.

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