๐ง Executive Summary
The Coca-Cola Company (NYSE: KO), a globally dominant player in non-alcoholic beverages, presents a mixed dividend profile as of Q4 2024. While the firm boasts a remarkable dividend consistency streak exceeding 54 years, its Dividend Resilience Score (DRS) of 17.19 (“At Risk”) and an excessively high payout ratio (186%) raise red flags about the sustainability of current dividend levels. The reinvestment signal is a firm “Avoid”, citing unfavorable coverage and deteriorating cash buffer. Although KO marginally outperforms peers in composite scoring, its yield (1.52%) lags behind both industry average (2.84%) and key dividend peers.
๐ Narrative Summary
๐ข Company Overview
Founded in 1886, Coca-Cola has built a vast portfolio of iconic brands like Coca-Cola, Fanta, Sprite, and Minute Maid. Despite operating in a low-beta defensive sector (ฮฒ = 0.454), the company faces margin pressures and rising debt obligations that challenge dividend security. Its market cap stands at $312B, and the company continues to demonstrate scale and pricing power.
๐ Dividend Performance Snapshot
- Current Yield:ย 1.52%ย (Below industry and peer average)
- Annual Dividend:ย $1.965ย (paid quarterly)
- Dividend Growth:
- 1-Year:ย 5.15%
- 3-Year CAGR:ย 5.04%
- 5-Year CAGR:ย 4.46%
- Dividend Streak: Overย 54 yearsย of uninterrupted payments.
Despite this growth history, recent signals point to mounting payout stress:
- Payout Ratio:ย 186%ย (Net Income basis)
- Dividend Coverage Ratio:ย 0.77
- Free Cash Flow Coverage: Insufficient to fully support dividend payouts
- Cash Ratio: 0.15ย (limited liquidity buffer)
๐ง DRS Breakdown โ Dividend Resilience Score: 17.19 (“At Risk”)
| Component | Score (out of 100) |
|---|---|
| Payout Ratio Risk | 0 |
| FCF Dividend Coverage | 0 |
| Cash Ratio | 14.6 |
| Debt to Equity | 100 |
| Interest Coverage Ratio | 0 |
Interpretation: The dividend is funded beyond sustainable levels, burdened by debt, and not sufficiently backed by free cash flow. These risk factors collectively downgrade dividend resilience to “At Risk”.
๐ Reinvestment Decision
- Signal: โย Avoid
- Rationale: High payout burden, weak liquidity, and low yield relative to peers suggestย suboptimal reinvestment outcomes.
- Recommended Action: Refrain from dividend reinvestment; consider redirecting funds toward higher-yield, lower-risk alternatives in the beverage sector.
โ๏ธ Scoring Summary
| Factor | KO Score | Peer Avg | Max |
|---|---|---|---|
| Dividend Health | 14 | โ | 30 |
| Financial Health | 13 | โ | 25 |
| Business Fundamentals | 10 | โ | 20 |
| Market Context | 5 | โ | 10 |
| Growth Potential | 5 | โ | 10 |
| Risk Factors | 3 | โ | 5 |
| Insider Sentiment | 4 | โ | โ |
| Total Score | 54 | 47.67 | 100 |
KO scores above the peer average but mainly due to legacy strength and scale, not current fundamentals. Dividend investors should scrutinize risk exposure.
๐ Insider Sentiment โ Positive, But Mixed Signals
- Sentiment Score:ย 55.94 (“Positive”)
- Trend: ๐ Up
- Recent Activity: Q2 2025 showsย 10 purchases,ย 0 salesย (bullish); however, past quarters saw higher sell volume.
- Interpretation: Insiders expressย cautious confidence, possibly due to internal strategic pivots or belief in long-term recovery, but it’s not strong enough to offset financial risk.
๐งฎ Peer Yield and Score Comparison
| Symbol | Yield (%) | Score |
|---|---|---|
| PEP | 4.01 | 41 |
| PRMW | 4.14 | 52 |
| KDP | 2.63 | 47 |
| KOF | 3.24 | 50 |
| CCEP | 2.42 | 44 |
| COKE | 0.61 | 52 |
| KO | 1.52 | 54 |
KOโs yield ranks among the lowest, and only marginally leads peers in score due to consistency. From a yield-efficiency standpoint, KO underdelivers.
๐งญ Strategic Insights for Investors
โ For Income-Focused Investors:
- Avoidย reinvestment in KO at this time.
- Explore higher-yield peers with better payout coverage such asย KOF, PRMW, orย PEP.
๐จ For Risk-Aware Growth Investors:
- KOโs weak free cash flow and over-leveraged balance sheet warrant caution.
- Only consider KO if strategic turnaround or margin improvements are confirmed in future quarters.
๐ Watch for:
- Reduction in debt-to-equity ratio
- Stabilization of payout ratio below 80%
- Improved FCF/dividend alignment
- Stronger interest coverage signals
Final Verdict:
Dividend Stability: โ At Risk
Reinvestment Appeal: โ Low
Current Position: Maintain with Caution / Divert Dividends
