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Tickers in this Article: BRK.A, CCE, KO, PEP
This is the kind of stock that makes up the backbone of any long-term portfolio, writes Jim Trippon of Dividend Genius.

There was an old, successful advertising and marketing phrase "Things go better with Coke," which Coca-Cola (KO) inaugurated in 1963 and used for many years. Well, investors might want to echo that sentiment, as the leading beverage maker announced another quarterly dividend increase.

The company hiked its payout from 47 cents a quarter to 51 cents. This raises the annual dividend from $1.88 to $2.04, an 8.5% increase. At a recent price of around $69, the current yield is 2.95%. The dividend increase was the company's 50th consecutive annual dividend increase.

The expected dividend increase came roughly a week after Coke's fourth-quarter and full-year earnings. Results for both were strong.

There were a series of one-time gains and some restructuring charges that affected the results. Most of these had to do with the previous acquisition of the company's North American bottling operations, Coca Cola Enterprises (CCE).

Excluding charges for this year's quarter, Coke's comparable EPS was 79 cents, compared to 72 cents on an adjusted basis for last year's same quarter. Revenue for the quarter was up 5%, to $11.04 billion, from $10.49 billion a year ago. Revenue for the full year increased 33%, from $35.12 billion to $46.54 billion. Full-year comparable earnings were $3.84 per share, up 10% on a comparable basis.

Remember, all these earnings numbers for Coke are non-GAAP, adjusted or comparable earnings, as emphasized by the company in its earnings release.

The company reported full year global volume growth of 5%, which was driven by international growth. Coke completed one phase of cost-cutting that saved roughly $500 million per year over the last several years, and it's expected that Coke will follow through with similar cuts in the next few years, which will save roughly the same amounts.

Coke not only increased its net revenue, but was able to push up operating margins as well. Coke's continued prospects for expansion of sales rest outside the US. The company also increased cash from operations by 7% in 2011.

Some Cautions
Coke's sales increased across all geographic markets. With its broad worldwide exposure, both to developed and emerging markets, Coke is a truly global company.

Critics would point out that this makes the beverage maker more susceptible to the global economy's downturns. There are also extensive currency exchange factors inherent in its business, and input costs have risen.

Others suggest the company has limitations due to its reliance on its Coke drinks and related products, unlike PepsiCo (PEP), which is a diversified snack food company. Indeed, some investors prefer Pepsi shares over those of Coke. There are questions as to how to grow the soft drink business in a saturated market, as well as overall health concerns about soft drinks.

Coke stock trades at around 18 times current earnings, a forward P/E of 15, and has traded in a range of $61.29 to $71.77 in the last 52 weeks.

Although some consider Pepsi a better stock, Coke is a true pure-play beverage company, so it still dominates that category. Its growth will not be explosive, roughly 6% annual earnings growth, but it will be internationally and globally based.

With health concerns about sugar and sodas, look for Coke and other soft drink makers to diversify their products more. Economic downturns still find consumers buying soft drinks. As for Pepsi, it's also a good company, though it has a bit of a different business emphasis, also it recently announced it has some restructuring ahead of it.

It's hard to argue with Coke's track record as a solid, blue-chip, dividend-paying investment. Several of the most important long-term investors—including, famously, Warren Buffett—are large shareholders. Buffett's holding company has $13.5 billion worth of Coke shares.

Whitney Tilson, hedge-fund manager who runs the Value Investing Congress, names both Berkshire Hathaway (BRK.A) and Coke as blue-chip investments attractive for investors with a five- to ten-year time horizon.

Estimates for Coke's earnings and revenue growth may be understated, as the company produced its recent growth through and emerging from a recession. The company has a star brand, is dominant in the marketplace, and continues to produce strong cash flows.

Income investors are well aware of Coke's consistent dividend paying record, as well as its regular dividend growth, a couple of much sought-after features in stocks by dividend investors.

The long-term earnings growth has been steady, though not spectacular, and the stock price has moved forward along with Coke's earnings and dividends over the years.

While the dividend forms a solid income base for investors, they shouldn't overlook the earnings growth and capital appreciation in the stock. It's been a terrific investment for many, and has a good chance to continue that way.

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