Stock Analysis

Coca-Cola's (NYSE:KO) Upcoming Dividend Will Be Larger Than Last Year's

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The Coca-Cola Company's (NYSE:KO) dividend will be increasing from last year's payment of the same period to $0.46 on 3rd of July. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

See our latest analysis for Coca-Cola

Coca-Cola's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Coca-Cola's was paying out quite a large proportion of earnings and 88% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 30.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 63% which would be quite comfortable going to take the dividend forward.

NYSE:KO Historic Dividend May 6th 2023

Coca-Cola Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.02 in 2013, and the most recent fiscal year payment was $1.84. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Coca-Cola has been growing its earnings per share at 49% a year over the past five years. However, Coca-Cola isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Coca-Cola's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Coca-Cola's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Coca-Cola that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Coca-Cola?

The Coca-Cola Company, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide.

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  • Trading at 22.4% below our estimate of its fair value

  • Earnings are forecast to grow 7.82% per year

  • Earnings grew by 9.7% over the past year


  • Has a high level of debt

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