Investors now investing € 10,000 in equities in Cola (WKN: 850663) invested, which received a dividend of 281 euros. The calculation is relatively simple: with a dividend yield of 2.81%, we get this value. It is not the great art of calculating it.
It is possible to receive more dividends. As the king of dividends, Coca-Cola has, after all, a quasi-obligation to continuously increase the amount distributed per share. However, 2.85% or 2.9% would not be the big hit. Hence the question again: Is it worth investing such a large amount in this stock to receive a dividend of 281 euros?
Exciting. Let’s do some reflections. Peers can lead us on a promising path. But also the considerations of what we really want with this investment.
Coca-Cola: 10,000 euros for 281 euros dividend?
To put it bluntly: if you are worried about the yield, you can buy quality at a different price. The quality refers to the distribution of Coca-Cola. True, the dividend king is rock solid. But e.g. Real estate income currently has a yield of 4.27%. With a bet of 10,000 euros, the investor would receive 427 euros as a distribution.
Hence the very clear statement: No, I would not invest 10,000 euros of my money in Coca-Cola to receive only a dividend of 281 euros a year. Although it is constantly rising over the next few years, and passive income will soon rise to 300 euros a year: That is not enough for me. And other peers just have completely different dividend yields. Or overall valuations looking at a price-to-earnings ratio of 27.
The key question, however, is: is there so much more than just 281 euros in dividends? This is especially relevant for Coca-Cola. At least I see a strong brand leading to moderate operational growth in times of inflation. And a stock that has already risen 18% year-to-date. That is significantly more than the total payout can offer us.
What are more attractive alternatives?
So the key question is not: Are there dividend stocks more attractively valued than Coca-Cola? No, it’s about answering whether the company-oriented total package with the dividend can be beaten by another company. Pricing, operational growth, brand strength and business model: everything comes into play at this point.
In the end, it is a very personal decision. Even with a yield of 2.81%, Coca-Cola shares would be a bit too expensive for their quality and pricing. Yet it is generally difficult to find a stock of similar quality with a cheaper valuation, such a strong brand and pricing that is also presumed to have an equally strong dividend.
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Vincent owns shares in Coca-Cola and Realty Income. The Motley Fool does not own any of the listed shares.