Are you looking for a new all-around holding for your portfolio? Consider a stake in Coca-Cola (KO -1.52%) while the stock's trading down from its late-September high. Although it's such a commonly suggested pick that it's almost become cliché, it's a popular pick for all the right reasons.
These three reasons stand out above the rest.
1. Coca-Cola is a brilliant marketer
There's a reason Coca-Cola is the world's best-known beverage company, and it's not the flavor or quality of its drinks.
Oh, that's not to say its brands, ranging from Gold Peak tea to Minute Maid juices to its namesake cola, aren't delicious. They're not particularly unique, though. For most intents and purposes, beverages are commodities, with the leading name in each category often owned by the company with the strongest ability to market them. That's Coca-Cola by a mile.
That's the outcome of a well-planned effort to deliver a direct push/pull marketing effort, by the way, in conjunction with lifestyle branding that endears a product to consumers. As an example, although it served no seemingly practical purpose at the time, much of the world still remembers the song "I'd Like to Teach the World to Sing," commissioned by Coca-Cola in 1971 and used in its television commercial for the next several years.
While the organization's not created any marketing material quite as memorable as this smashing success, it's still done incredibly well on this front -- by design. Coca-Cola Christmas ornaments are a thing. Ditto for clothing with the company's name and logo splashed across it. That's not the norm.
Of course, with the ability and willingness to spend on the order of $5 billion per year on advertising, few other rivals can afford to match that effort.
2. Coca-Cola's business model practically guarantees profitability
Coca-Cola may not quite be the company you think it is.
Contrary to a common assumption, this company probably didn't actually bottle the beverages with its brand name on them that you see on stores' shelves. It is more than likely these production and distribution duties were handed off to third-party bottlers, opting to simply sell flavor concentrates to these partners.
It's a business model with potential downsides. One of them is less revenue, paired with less control of the manufacturing and distribution process. While the company certainly requires its bottlers to adhere to certain quality standards, this model still adds a layer of separation between Coca-Cola and the end-users of its products. Generally speaking, an organization would prefer complete control of the entire production and distribution process just to ensure it's being done properly.
The upsides of this business model outweigh the downsides though. By utilizing bottling partners for most of its production, Coca-Cola offloads much of the cost-based risk of being in the beverage business. It's the bottlers themselves that are responsible for managing higher costs for things like fuel, trucks, production facilities, etc. The Coca-Cola Company's operating costs are not only predictable, but manageable.
Being able to make these spending (and pricing) adjustments as needed all but guarantees the company can keep itself out of the red and in the black.
3. Coca-Cola generates unstoppable dividend growth
Finally -- and in the same vein as the company's persistent profitability -- Coca-Cola stock's dividend and dividend growth track record is nothing less than stellar. The company has not only paid a quarterly dividend like clockwork for decades, but has also raised that dividend every year for the past 62 years.
This, of course, is a function of the beverage giant's continued profitability and reliable growth. But, it's also a reflection of the nature of the business.
See, brand loyalty within the drinks industry is rather high, and even more so after decades of branding that inspires customers to shrug off price increases and look past competitors' advertising efforts. Statistics show that roughly nine out of 10 U.S. consumers who ever drink one of Coca-Cola's products do so on a regular basis, driving reliable recurring income that's passed along to shareholders.
Newcomers will be stepping into Coca-Cola stock while its forward-looking dividend yield is a healthy 2.9%.
A good fit for most investors' portfolios
Is Coca-Cola a must-have name for any and all investors? No.
While the company's top and bottom lines are reliable growers, they're also slow growers. You're never going to see double-digit growth from this company. In fact, the majority of its profits are used to fund its dividends, limiting how much money The Coca-Cola Company can invest in its own growth. If you want growth and don't need or want this income, look elsewhere.
If you're looking for steady income growth from an organization with real longevity and a bit of potential for capital appreciation though, you'd be hard-pressed to find a better choice.
