The Coca-Cola Company (NYSE: KO) is a leader in the beverage industry and offers hundreds of brands to consumers, including soft drinks, fruit juices, sports drinks and other beverages. The company found its early success and is most well-known for the Coca-Cola soft drink for which the company is named.
The beverage giant has been a stable of the global economy for years, and it has reached a point where many investors fear market saturation, where the only way to go is down or stagnant at best. However, there are many benefits in investing in a company with Coca-Cola's track record.
A Clean Balance Sheet
It should come as no surprise that a company the size of Coca-Cola has an extremely clean balance sheet with high amounts of cash on hand and a low amount of debt.
This cash position gives Coca-Cola the ability to invest in product innovation, brand acquisition and advertising expenditures. The company's low amount of financial leverage equates to a lower amount of interest payments in relation to its competitors, which translates to an even higher amount of cash flow. This cash flow increases benefits to investors in the form of future dividend payments and increased capital gains earned through company investments.
A company the size of Coca-Cola has an inherent amount of leadership within its industry. As of July 2015, Coca-Cola is the number one company in the beverage industry in terms of market cap. Coca-Cola garners an 8.4% global market share, in contrast to the 3.6% global market share of rival PepsiCo, Inc. (NYSE: PEP).
This high valuation and its large market share come from Coca-Cola's ability to be a leader not just in the overall industry, but in key locations around the world. Mexico, for example, consumes almost twice the amount of Coca-Cola products as the United States.
While there are concerns about Coca-Cola's market saturation, many parts of the world, such as China, remain underpenetrated. These markets provide a positive opportunity for future expansion.
Focus on the Right Product Portfolio
Coca-Cola has a product portfolio that includes more than 100 brands, but it has consistently remained focused on mainly beverages, which has strengthened its product portfolio. While competitors such as PepsiCo offer a range of products that includes beverages and snacks, Coca-Cola has remained steadfast as a leader in beverage brands.
This has allowed Coca-Cola to keep its product messaging strong and offer consumers the best type of beverages on the market. While its product portfolio is large, Coca-Cola has kept its core competency of innovating, selling and distributing carbonated and non-carbonated beverages, which allows it to stay focused on its core business units. A good example of this is the company's acquisition of Keurig Green Mountain Coffee, which offers a differentiated product that is still in the beverage wheelhouse.
Coca-Cola's competitors, on the other hand, have to divide their attention between a wide range of product types.
Consistent Dividend Payments
Coca-Cola has paid dividends for 53 years in a row, and it has increased its dividend each year. For the first quarter of 2015, Coca-Cola paid a dividend of 33 cents per share, which equates to a dividend yield of 3.1%. The 33-cent dividend payment for the first quarter of 2015 was an increase of 8% versus the dividend the company paid out in the fourth quarter of 2014.
This is a signal to investors that Coca-Cola's senior leadership remains committed as ever to return cash to shareholders through the payout of large and growing dividend payments. If dividend payments continue, the company expects to pay out a total of $6 billion to investors in 2015.