There are many reasons why Coca-Cola (NYSE: KO) is the largest holding of legendary investor Warren Buffett.
Even though Buffett owns other Dividend Aristocrats such as ExxonMobil (NYSE: XOM) and Wal-Mart (NYSE: WMT), Coca-Cola is stands out in Buffett’s portfolio at Berkshire Hathaway (NYSE: BRK-A). When Coca-Cola reports on Thursday, there will probably be result to justify that faith from “The Oracle of Omaha.” Many previous articles on this site have detailed the bullish aspects of Coca-Cola for growth, value, and income investors (chart below).
As the chart shows, it has been steady, solid rise for Coca-Cola.
The share price is up for the last week, month, quarter, six months, and year of market action. For 2014, Coca-Cola has risen by 4.30 percent. The recent jump is related to the upcoming earnings report.
Like the other Dividend Aristocrat stocks such as Wal-Mart and ExxonMobil, Coca-Cola continues to appeal to income investors.
At present, the average dividend yield for a member of the Standard & Poors’ 500 Index (NYSE: SPY) is around 1.8 percent. The dividend yield for Coca-Cola is 2.88 percent. Coca-Cola also has a tradition of increasing its dividend. As a Dividend Aristocrat, Coca-Cola has increased the amount of its dividend annually for at least the past 25 years.
That means that the shareholders got a raise every year just for owning the stock!
This dividend practice of Coca-Cola should most likely continue for the future (which will probably be true of ExxonMobil and Wal-Mart, too). In addition to the dividend increasing, investors should look for earnings per share to go up, too. The consensus among Wall Street analysts is bullish for Coca-Cola in that indicator. Now trading around $42.40, the mean analyst target price next year for Coca-Cola is $44.86. Combined with an above average dividend yield and its history of being increased, that makes for an appealing total return!