Are we in a bear market?
It’s still too early to say, though it’s starting to feel that way. Many of the growth names of the past decade are getting slammed, and there’s no obvious end in sight.
While it looks nasty out there, there’s a quiet bull market in “boring” dividend payers like The Coca-Cola Co. (NYSE: KO).
Coca-Cola products are ubiquitous. Apart from its namesake soda, the company is a leader in sports drinks, bottled water, orange juice and a host of other products. If it’s liquid and nonalcoholic, chances are good that Coke is a competitor.
Coca-Cola’s Dividend and Stock Rating
Coca-Cola isn’t the highest yielding stock in the market. But at 2.7%, its dividend yield is competitive with high-quality bonds.
And Coke is a serial dividend raiser. That’s important when inflation is high. The company recently hit a new milestone, raising its dividend for the 60th consecutive year.
There are few places to hide these days, yet Coca-Cola stock is sitting near its all-time highs. Investors have found some form of safety in KO.
And that’s reflected in our Stock Power Ratings system, where it rates as “Bullish” with a composite score of 63.
Coca-Cola Co.’s Stock Power Rating on April 26, 2022.
Let’s drill down to see what drives that rating.
Volatility — Coke’s biggest selling point is that it doesn’t move all that much. Its business is stable and largely recession-proof. On top of that, the company is well capitalized. There’s not much that can blow up KO. That translates into a stellar 98 on our volatility factor, meaning it is less volatile than all but 2% of the more than 8,000 stocks in our universe.
Momentum — Investors want low volatility stocks these days. That’s evident in a hurry when you see KO’s momentum factor score of 87. Remember when I said KO doesn’t move that much? It’s bucked that trend in recent months. And a nice earnings report helps.
Coke’s shares are in a strong uptrend and are trading near all-time highs. It’s been a long time since we’ve seen one of the world’s oldest and most recognized brands leading the market higher. But again, so long as investors crave stability, it’s likely to persist.
Quality — Few brands are as recognized as the red Coca-Cola logo. Other than the McDonald’s golden arches, it might be the most recognized brand in history. Coke’s strong branding allows it to charge a premium for its products, and we see the result of that in KO’s high quality factor rating of 80.
Growth — Coke’s hyper-growth days are decades behind it. This is a mature cash cow, not an up-and-coming growth dynamo. That said, its growth factor rating of 57 is still above average. This speaks volumes about the company’s ability to redefine itself and find new markets for its products.
Value — Alas, this is not a cheap stock by any stretch of the imagination. Coca-Cola rates a 14 on our value factor. That’s not a deal-breaker in this market, however. When times get tough, investors look for quality and stability. And they’re willing to pay up for it.
Size — As we’ve established, Coca-Cola is a large company with well over a century of history. It’s one of the most recognized brands in the world. It’s only natural that it rates low on our size factor at 1. But remember, we’re looking for a low-drama income stock. Larger size is OK in this scenario.
Bottom line: I don’t know how much longer this bout of volatility will last. But I’m operating under the assumption that it might be a while.
If that’s the case, having a few sturdy stocks like Coca-Cola in the portfolio isn’t a bad idea at all.
To safe profits,
Charles Sizemore, Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.