Due to disappointing earnings, Coca-Cola (NYSE: KO) has had a rough couple of days.
That is costing short term traders who drove the stock up earlier this month, expecting better results. For long term investors, however, the temporary dip should be looked at as an opportunity to build up a position in Coca-Cola that should provide a solid total return.
Despite the decline, Coca-Cola is up for the last week, month, quarter, six months and year of trading.
It has firmly established itself as a cornerstone for long term total returns. Coca-Cola has long been the largest position of legendary investor Warren Buffett for the portfolio of Berkshire Hathaway (NYSE: BRK-A).
The overall return for the shareholders of Berkshire Hathaway has more than justified Buffett's faith in Coca-Cola.
The international growth of Coca-Cola should provide solid total returns for the future.
As with so many other companies, including PepsiCo (NYSE: PEP), Coca-Cola is counting on growth abroad, especially in China. In the world's most populous country, Coca-Cola is spending billions on acquisitions. In terms of a global presence, there are only two countries that do not have products from PepsiCo or Coca-Cola: Cuba and North Korea.
Analysts Weigh In
Wall Street projects a positive trend in earnings for Coca-Cola.
This year, earnings per share are off by 3.60 percent. For the next five years, however, the Wall Street analyst community sees earnings per share for Coca-Cola rising by 6.70 percent. That is a positive development for the earnings trajectory, for both this year and this quarter.
The dividend is also a positive for Coca-Cola at 2.88 percent.
As a Dividend Aristocrat, Coca-Cola has a history of increasing the amount of its dividend on a yearly basis. That adds greatly to the total return. Combined with the projected earnings growth, Coca-Cola should produce double digit returns. Now trading around $41 a share, the mean analyst target price for Coca-Cola over the next year is $44.86.
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- Consumer Discretionary