Key Points
Coca-Cola's second fiscal quarter extends steady, long-lived fiscal growth.
Moreover, these strong results reassure investors that the beverage giant's business is built to continue supporting -- and growing -- its dividend payments.
This stock's dividend yield isn't enormous, but it more than makes up for this lower yield with reliability.
It was another solid quarter for Coca-Cola (NYSE: KO). The beverage behemoth topped its fiscal Q2 sales and earnings estimates and upped its full-year revenue guidance to boot.
Perhaps the most important takeaway from the company's second-quarter report, however, is continued assurance that its dividend payments remain well supported by profits.
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The quarter that was
Coca-Cola turned $13.4 billion in revenue into a per-share profit of $0.97 during the three months ending in June. Both were up from year-earlier comparisons, $12.6 billion of $0.87, respectively. Both topped analysts' expectations for a top line of just under $13.2 billion and a bottom line of $0.93 per share. Unit volume was up 5% year over year, and profit margins widened slightly.
Arguably more exciting, the company raised its 2026 revenue and earnings. Expected sales growth of between 4% and 5% was narrowed to the upper end of that range, while per-share profits that were supposed to be up between 8% and 9% are now expected to be 9% to 10% higher.
All in all, it was another strong quarterly report.
Perhaps the crowd most excited about Coca-Cola's strong second-quarter numbers, however, are the shareholders who hold this stock first and foremost for the reliable dividend income it provides.
Sustainable dividends and dividend growth
To say Coca-Cola is a solid dividend stock is something of an understatement. It's not only paid a quarterly dividend like clockwork for decades, but with February's increase, the company's now raised its annual per-share payment for 64 consecutive years. It's a Dividend King, meaning the stock has recorded at least 50 consecutive years of dividend raises; only eight other companies have a longer track record of yearly dividend growth.
Affordability isn't an issue that's straining the company's ability to continue paying and raising these dividends either. Of last quarter's earnings of $0.93 per share, only $0.53 of that was consumed by the dividend payout.
Indeed, Coca-Cola's payout ratio -- the amount of profit used to fund dividend payments -- has consistently hovered around just above a healthy, balanced 60% for the past decade, when the company dramatically restructured its business by selling most of its U.S. bottling operations back to bottlers, lowering its net revenue but widening its net profit margins. That's not apt to change in the foreseeable future either, which is why KO remains one of investors' favorite dividend stocks.
Real numbers, for perspective
To this end, what would a $30,000 position in Coca-Cola pays every quarter right now? That's roughly 336 shares of the beverage giant, each paying $0.53 every three months. So, that would be nearly $180 in cash dividend payments per quarter, or $720 per year. Calculated another way, this stock's current annualized dividend yield of 2.4% on a $30,000 holding translates into $720 per year, or $180 per quarter.
That's not a huge amount of money; you can find higher-yielding stocks to be sure. It's an incredibly reliable dividend, though, and one that grows just as reliably, supported by the company's well-established brand names within the consumer staples space. Paying up for quality like this usually pays for itself.
James Brumley has positions in Coca-Cola. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.