From Stansberry Research:
Nearly every accounting number can be massaged...
Through one trick or another, earnings and even sales can be adjusted to show a better result.
However, one of the few numbers that can't be faked is dividends. Once a company cuts a check for a dividend, that cash comes out of its bank account.
When a company consistently sends dividends to shareholders... and keeps paying more and more... there's simply no better sign that the company is currently doing well. And there's no better predictor that the company will continue to do well.
At Stansberry Research, we like to refer to the best companies with growing dividends as "World Dominating Dividend Growers" (WDDGs). These companies can make for some of the best long-term investing opportunities out there.
These businesses are usually at the top of their industries and have great brand recognition. This ensures that they'll remain the dominant players in their sectors.
WDDGs are some of the safest investments you can hold in your portfolio for years. And today, we're looking at a perfect example...
Coca-Cola (NYSE: KO) is the largest beverage company in the world.
Coke sells more than 1.9 billion beverages across the world every day, more than any other beverage brand.
It's one of the greatest businesses in history.
Pharmacist John Pemberton invented Coca-Cola back in 1886. Pemberton, like many wounded Civil War veterans, had become addicted to morphine. He invented the beverage as a non-alcoholic cure for drug addiction, depression, and alcoholism.
The formula has changed over the years, but the product is more popular than ever.
Atlanta businessman Asa Candler bought out Pemberton and other investors for $2,500 in 1889, and Candler incorporated the Coca-Cola Company in 1892. Coke's headquarters remain in Atlanta to this day.
Today, Coke is one of the most well-known companies in the world. It boasts many other well-known brands, like Sprite, Fanta, Dasani, Powerade, and Minute Maid.
In fact, Coke's portfolio contains 21 different billion-dollar brands as of 2017.
With so many strong brands giving it a wide reach, Coke is the dominant player in the beverage industry.
Coke's brands capture approximately $1 out of every $4 that people spend on non-alcoholic, ready-to-drink beverages. So every time someone buys an energy drink or a can of iced tea, there's a 25% chance it's a Coke product.
The company has the No. 1 position in the global market for sparkling soft drinks, juice, dairy drinks, and tea and coffee.
This has helped Coke build one of the best businesses around. Let's look at the numbers...
Of its $35 billion in sales over the past 12 months, nearly $8 billion has filtered down to free cash flow ("FCF"). That means for every $1 Coke brings in, $0.22 translates to FCF.
Most companies are lucky if their FCF is more than 10% of their total revenue. Coke brings in doublethat.
Remember, FCF is the one metric we value most...
It's simply a measure of a company's cash profits minus capital expenditures – or "capex." (Cash profits are the cash a company generates from its operations. Capex is the cash needed to maintain equipment and invest in new buildings and equipment.)
And with all this FCF, Coke can reward its shareholders. Over the same period, Coke returned $6.5 billion to its shareholders through dividends and stock buybacks.
That means for every dollar that Coke made in sales, $0.19 went back to shareholders.
That's an excellent return, and it will only get better.
Coke has increased its dividend payout every year for 56 consecutive years, making it one of the few "Dividend Aristocrats." Even more impressive, Coke has done this despite seven recessions over the same period.
However, investors have been concerned about Coke recently, despite its strong business.
You see, many consumers are shifting away from sugary drinks and are instead opting for low-calorie or no-sugar options. But Coke is adapting...
The company is no longer just a soda and soft-drink maker. It has transformed itself into a total beverage giant. The company has begun reducing sugar across its entire portfolio of drinks. Eighteen of its 20 top-selling brands now offer a low- or no-sugar option, if they aren't already low- or no-sugar.
Now, Coke sells more than 4,300 different beverages under 500 brands of waters, juices and juice drinks, sodas, teas, and sports and energy drinks.
The shift is paying off...
In the most recent quarter, Coke reported sales and earnings that topped estimates... And the company boosted its 2019 sales forecast above expectations. The stellar report sent Coke's shares soaring, reaching an all-time high.
Over the past two years, Coke's shares have returned more than 24%, including dividends.
Coke is one of the most well-known businesses in the world. It has a dominant position in almost any market it enters... And the company is quickly adapting to take advantage of changing consumer tastes.
Sometimes investing is simple.