Is Coca-Cola 'Faith-Based' Investing at its Finest?

Writing in the January 2014 issue of Kiplinger's Personal Finance magazine, columnist James Glassman picked Coca-Cola as a favorite for 2014.

Although it did not perform as well as other selections for 2013, Glassman described Coca-Cola (NYSE: KO) as, "a classic 'faith-based stock' that is a great company that, by means that can't be predicted, always seems to bounce back."

There are others like that, such as ExxonMobil (NYSE: XOM) and Wal-Mart (NYSE: WMT).

Glassman is very bullish on the culture of Coca-Cola, which allows it to "always solve its problems." About the brand of Coca-Cola, legendary investor Warren Buffett once stated that, "If you gave me $100 billion and said, 'Take away the soft-drink leadership of Coca-Cola in the world', I'd give it back to you and say it can't be done."

Not surprisingly, Buffett is a major shareholder of Coca-Cola.

The dividend yield of Coca-Cola is always a major attraction for Glassman. For the average member of the Standard & Poor's 500 Index, the dividend is around 1.9 percent. The dividend yield for Coca-Cola is nearly 50 percent higher, at about 2.8 percent.

In addition, Coca-Cola, as with ExxonMobil and Wal-Mart, are "Dividend Aristocrats;" publicly-traded companies that have increased the dividend annually for at least 25 consecutive years. A history like that is something for shareholders to put faith in that it will happen every year. Again, not surprisingly, Warren Buffett is a major shareholder in Wal-Mart and ExxonMobil, too.

Coca-Cola does not simply rely on faith to produce its 18.50 percent profit margin (about twice the market average).

It spends more than others to advertise and market. A current campaign in China entails billions to increase its presence, through acquisitions, if needed.

Like Glassman, investors should have faith that Coca-Cola will outperform others with long term returns for its shareholders.

Posted-In: dividend aristocrats food and beverage James Glassman soft drink industryLong Ideas News Emerging Markets Dividends Dividends Restaurants Markets Media Trading Ideas General

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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