Should I Buy KO?

Coca-Cola is one of the best known companies on earth as well as one of Buffets core long term holdings, so I could say good enough for Buffet it’s good enough for me, However, I like to make my own decision as nobody is perfect. To properly look at KO I will also need to look at PEP and DPS for a comparison and to see how KO is actually valued.

      1.      Price to Earnings Ratio.

Price To Earnings (TTM)
KO	PEP	DPS
25.5	22.1	20.8

Forward Price To Earnings
KO	PEP	DPS
18.8	19.3	17.9

Price to earnings on all three companies are very high these drink companies are on the expensive side when it comes to price to earnings even looking at Forward price to Earnings is expensive which is somewhat expected when looking at solid companies with good dividends. From the analysis DPS seems to be the best value bet however, we will look further.

      2.      Dividend Yield and Growth

Dividend Yield
KO	PEP	DPS
3.14%	2.81%	2.39%

 Next I took a look at the Dividend Yields. As KO has long been a favorite by Buffet as a dividend investment it yields a healthy 3.14% and has a long history of increasing that dividend. All three companies have good yields of over 2% with KO being the highest at with DPS being the lowest at 2.39%.

Dividend Growth Rate
KO	PEP	DPS
7.72%	6.77%	17.11%

 Another metric I like is dividend growth. A company may have a good looking dividend but I like companies that have histories of increasing this dividend so I looked at Dividend Growth. From this DPS has defiantly grown their dividend the most by almost 3x the other two. But all three show consistent increase in dividends.

     3.      Payout Ratio

Payout Ratio(TTM)
Company	KO	PEP	DPS
Ratio	77.3%	60.5%	47.2%

With good yields and good growth for all three companies the payout ratio needed to be looked at. This metric lets us know if the company can actually afford the dividend and also afford to increase it year over year. From the analysis however it shows the PEP and KO both payout ratios are very high at 81% and 94% respectively  DPS seems to have the best payout ratio at just under 60% the number I like to look for  on a growth basis. DPS keeps enough funds from their EPS to grow the company while PEP and KO are returning most of their profits to shareholders.

 
In conclusion I like companies with low P/E ratios compared to the market, yields >3% and, consistent dividend growth and a payout ratio of less than 60%. None of these companies off quite what I am looking for as an investor however, I will add DPS to my watchlist as it represent the best option in this group in my opinion.

I know Buffett love his Coca-Cola, but right now for me it’s just to expensive with the growth its capable of