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What to Make of The Coca-Cola Company (KO)’s Earnings

Published on July 18, 2013 at 12:30 pm by The Motley Fool in News
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Coke isn’t only highly efficient with its cash but it’s also the most popular drink in the world. Coca-Cola Classic has been consistently ranked the top-selling soft drink in the world. Since 2011, its second place partner has been none other than Diet Coke. Pepsi Cola, on the other hand, only comes third. This means that by definition, The Coca-Cola Company (NYSE:KO) is the most successful in its industry. Odds are excellent it’ll continue being No. 1.

  • Coke is extremely shareholder-oriented, while Pepsi is much less so. I always like to calculate what I coin “shareholder yield” by adding the total value of shares repurchased to the total value of dividends paid, as a percentage of cash flow from operations. In 2011, Coke paid $4.3 billion in dividends and bought back $2.95 billion of its shares. In 2012, Coke paid $4.6 billion in dividends and bought back $3.1 billion of its shares. This comes out to a “shareholder yield” of 76% and 72% for the years 2011 and 2012, respectively. Pepsi doesn’t even come close to these figures. In 2011, Pepsi paid $3.1 billion in dividends and bought back $2.9 billion of its shares. In 2012, Pepsi paid $3.3 billion in dividends and bought back $2.1 billion of its shares. This comes out to a “shareholder yield” of only 67% and 64% for the years 2011 and 2012, respectively. That’s a large difference in favor of the “Real Thing.”

    • The Foolish takeaway

    It’s no accident The Coca-Cola Company (NYSE:KO) is the largest stock holding of the world’s greatest investor, Warren Buffett. He knows the business isn’t going to change much over the next several decades. It’s just going to keep growing. I strongly recommend that you dismiss this quarterly revenue miss. Have a cold Coke and focus on the big picture instead.

    The article What to Make of Coca-Cola’s Earnings originally appeared on Fool.com and is written by Shmulik Karpf.

    Shmulik Karpf has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Coca-Cola, and PepsiCo. The Motley Fool owns shares of Berkshire Hathaway and PepsiCo. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

    Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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