The IPO of Coca-Cola (NYSE:KO) took place more than a century ago. The company issued 600,000 shares of publicly available stock in September 1919 at $40 per share, according to a company news release.
Coca-Cola had already evolved significantly since Atlanta pharmacist John Stith Pemberton invented the formula for the original carbonated beverage in 1886. However, few could probably imagine where Coca-Cola or its stock would go in the coming decades.
The value of Coca-Cola today
Consumers can now find Coca-Cola products in more than 200 countries. It has also become a beverage empire encompassing over 500 brands across numerous types of drinks, though it intends to reduce that number over the next few years.
Still, such a footprint means Coca-Cola stock, like most consumer staples stocks, tends not to draw as much attention as newer, higher-growth stocks.
Image source: Getty Images.
Nonetheless, for investors who imagine the time horizon for owning a stock decades out, the returns look considerably more impressive. Throughout its history, Coca-Cola has experienced 11 stock splits. So one share sold in 1919 has become 9,216 shares today.
Hence, if an ancestor of yours had purchased three shares of Coca-Cola stock for $120 at the IPO and eventually handed over the split shares to you, just those 27,648 shares would now be worth more than $1.483 million.
The Coca-Cola dividend
The company also made its first dividend payment in 1920 and has made almost 400 consecutive quarterly dividend payments since then.
Today, the dividend payout stands at $1.64 per share. Multiply those 27,648 shares by the dividend and you have a yearly dividend income this past year of $45,342 to add to the share price value. At the current stock price, the dividend yields about 3.2%. To put that into perspective, the S&P 500 index average dividend yield is about 1.6%.
Though that yield sounds compelling for a new investor, the bulk of the benefit has accrued to those who held the stock long term. Coca-Cola implemented its 58th consecutive annual dividend increase in February. Only a handful of stocks have a longer track record of consecutive dividend increases than Coca-Cola. These stocks, as well as Coke, are known as Dividend Kings.
Admittedly, the payout has become a significant expense for the company. The dividend claimed about $3.5 billion of the company’s $5.5 billion in free cash flow in the most recent quarter.
Nonetheless, this makes the payout sustainable. More importantly, since breaking the long payout streak could undermine confidence in the stock, investors can probably expect another payout hike next year and in the years to come.
Warren Buffett and Coca-Cola
The payout, along with the overall value proposition, is what probably attracted Warren Buffett to the stock. His company, Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), made its first purchase of Coca-Cola stock in 1988.
Buffett would go on to invest about $1.3 billion in Coca-Cola. The company now holds 400 million shares, or 9.3% of Coca-Cola’s stock. That stake is worth approximately $20.6 billion today.
The stock has only risen by just over 60% over the last 10 years, significantly underperforming the S&P 500. Nonetheless, Buffett is probably happy with Coca-Cola’s performance in one critical respect.
This year, his 400 million shares generated $656 million in dividends. This is more than a 50% return on his original investment, meaning he currently receives the money back on this investment (and then some) every two years without selling a single share!
The lesson of Coca-Cola stock
Indeed, most investors do not have a 100-year investment horizon. Even if they did, they should not expect one of today’s shares to split into more than 9,000 a century from now. Since Coca-Cola is now available in nearly all countries, driving growth has become a more difficult challenge.
Still, the fact that dividend returns are roughly double the S&P 500 average might attract new investors today.
Moreover, even if investors decide not to buy Coca-Cola stock, it offers one critical lesson. Investors like Buffett who find a solid company and hold on to that for decades could earn considerable rewards.
This is a huge incentive to ignore the day-to-day machinations of a stock. Instead, the largest rewards could come to stockholders who focus on long-term growth and quietly collect dividends.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
