Tuesday, April 16, 2013

Welcome Aboard, Coca-Cola

Last month I pulled the trigger on a well known U.S company that you just might have heard of, that is unless you were raised by wolves in the mountains. Coca Cola is probably the most recognized product on the planet and it all started as a brain tonic back in 1886.

Coca Cola may seem like a no-brainer investment, but to be honest, it wasn’t an easy choice for me. Let’s face it, sugar water is not exactly the most healthy product to consume. A few years ago there was big uproar over the amount of sugar in soft drinks and I imagined all the cola empires collapsing in the aftermath. Boy was I wrong!

Even with an increase in healthy eating and active living, Coca-Cola remains more profitable then ever before. After all that, I figured I might as well take the plunge into its sugary un-goodness. Coca-Cola isn’t all about soda though as they do offer a wide variety of sugar free products, juices and bottled water. KO might not be the most ethical investment I could make, but there sure are a lot worse companies out there.

I’d like to buy the world a coke…

Coca Cola products are available in over 200 countries around the world. With growing exposure in emerging markets across the globe, there will be growing profits from new soda drinkers for years to come. Coca-Cola has been around for over 125 years and they will probably be around long after me. You couldn’t ask for a better common stock to invest in.

… and collect the dividends!

Coca-Cola has been paying a quarterly dividend since 1920 and has increased the dividend for the last 50 consecutive years. Let’s have a look at the dividend history over the last 13 years:

KO 2013

KO has a current dividend payout ratio of 56% which means its dividend is relatively safe. From a conservative investor point of view, Coca-Cola is a solid choice for anyone’s portfolio. I could care less if the stock increases or decreases in value, as long as the dividends come through I’ll be a happy camper!

Avoid The Tax Man

This is the third U.S stock that I have purchased and to avoid paying withholding taxes to Uncle Sam, I hold my shares in my registered trading account. As the dividends are deposited into the account, they are automatically converted into Canadian funds. Depending on the value of the Loonie, the dividends can change in value. When the Loonie is high, I make less dividend income. When we are below parity my dividend income increases slightly.

If I didn’t hold the shares in a registered account, I would have a lot more work to do at tax time. Since I like to keep my investing as simple as possible, the choice for me is obvious. I like to invest in Canadian stocks as much as possible but since there is no Canadian soft drink giants to invest in, my hand is forced to shop south of the border.

I think KO will make an excellent addition to my portfolio. Now I can just sit back, let Coca-Cola do there thing, and watch the dividends come rolling in. Whoever said investing was hard was doing it wrong. 

Do you have any shares in KO?

This article was written by The Loonie Bin. If you enjoyed this article, please consider subscribing to his feed.


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