This FTSE 100 dividend stock’s flatlined in 2019! I’d spend £5k on my ISA and buy it today

Could this FTSE 100 laggard rip higher in 2020? Royston Wild explains why the answer could be yes.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »