Coca-Cola HBC (LSE: CCH) has performed better than many other FTSE 100 shares in 2019, but its performance isn’t one to be lauded. Its share price is basically flat from levels seen at the start of January. Nevertheless, I’d happily but it today ahead of what threatens to be another turbulent time for the global economy and one which could supercharge demand for defensive shares like this.
As we all know, Coke is one of those much-loved drinks labels whose cans and bottles fly off the shelves whatever the geopolitical and macroeconomic climate. Prices can rise and yet most drinkers won’t bat an eyelid. It’s why City analysts expect earnings to have risen 18% in this outgoing year despite a combination of softer overall consumer spend and bad weather, and for it to follow this up with a 12% rise in 2020.
The power of the Coca-Cola brand was illustrated perfectly by Kantar Worldpanel’s Brandz ranking report over the summer. This showed that the ubiquitous drinks label was the 14th most valuable brand in the world, worth an estimated $80.8bn, making it the highest fast-moving consumer goods (or FCMG) brand on the list.
Full of fizz
Those thinking that these estimates are a bit giddy might want to look at the Footsie firm’s latest financials for validation of these numbers. In November’s third-quarter update Coca-Cola said that, despite adverse weather conditions in several of its markets, that volumes still rose 1.1% in the period. Thus at constant currencies revenues in the three months to September improved 3.4% year on year.
The drinks giant continues to grab share from its rivals, ensuring that even in tough trading conditions the top line can be relied upon to keep swelling. And thanks to ongoing innovation, examples which include expansion in the no-sugar market through its ‘Zero’ range of beverages, entering the energy drink market, and bulking up its presence in the mixers category, Coca-Cola is latching onto changing consumer trends to also help sales to move in the right direction.
On the up
The sort of revenues and thus earnings resilience that Coca-Cola provides is critical for any stock looking to raise dividends each and every year. And in recent times the FTSE 100 firm has indeed rewarded investors with some solid payout hikes (up 51.4% over the past half a decade).
It’s no surprise that some more mighty rises appear to be in the offing over the next year, too. Last year’s reward of 56 euro cents per share is predicted by City analysts to rise to 64 cents in 2019 and again to 71 cents in 2020. Investors can get hold of better near-term yields than Coca-Cola’s subsequent ones of 2.2% and 2.4%, though not all have the sort of defensive qualities to help dividends to continue rising over the next decade and beyond. I’d happily snap up the Coke bottler today, a share fully worthy of a premium price-to-earnings ratio of 18.3 times.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019