Some of the safest trades of the year so far have been the so-called “Dogs of the Dow”—high dividend-yielding blue chip stocks. If you want proof, look no further than Coca-Cola (KO).
With a dividend yield of 2.67%, the stock has exploded from a January 2022 low of about $58 to $67.20. While it’s slightly overbought at the moment, we believe the stock could push aggressively higher for the remainder of the year.
JP Morgan seems to like Coca-Cola, too. In late March, the firm raised its target to $68 from $66, with an overweight rating.
Even with the economy in disarray, demand for Coke products still appears strong. As CNN notes, “Traders have flocked to stodgy consumer staples companies like Coca-Cola because they offer sales and earnings stability at a time of geopolitical turmoil, worries about the Federal Reserve’s rate hikes and inflation.”
Edward Jones notes that “Coca-Cola is doing a solid job reinvigorating its core carbonated soda business, with new sugar-free offerings and smaller can sizes. It is a highly innovative company that is improving and expanding its offerings in energy and sports drinks.”
Even better, Coca-Cola shows no signs of slowing down. In its most recent earnings report, the company said sales were up 16% year over year to $10.5 billion, well above expectations for $9.8 billion. Plus, profits of $2.8 billion, or $0.64 per share, were up 24% year over year. EPS also came in above expectations, at $0.58 per share.
Moving forward, Coca-Cola Chairman and CEO James Quincey is confident. “We remain true to our purpose and are staying close to consumers. We are confident in our full-year guidance, and we are well-equipped to win in all types of environments as we fuel strong topline momentum and create value for our stakeholder,” he said in a company press release.
In short, even with the economy is disarray, demand for Coca-Cola products isn’t fizzling out.
We can see that in the KO stock chart. With that aforementioned share price increase this year from about $58 to $67.20—with a dividend to boot—we’d like to see the stock test $70.
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Source: Investors Alley