Coca-Cola’s Partnerships Make KO Stock a Solid Long-Term Pick

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Coca-Cola (KO) has started this second week of 2016 with a pop, both literally and figuratively.

coca-cola stock ko sales emerging marketsStifel (SF) analyst Mark Swartzberg has upgraded KO stock from a hold to a buy. That’s a very bullish sign.

The company had a tough 2015, largely because of the weak global economy. First, it pushed sales down and limited growth. Then, because the U.S. dollar was (and remains) so strong, overseas sales meant less when converted back into U.S. dollars. That hurt earnings.

But, KO isn’t the only company suffering from its global exposure, and the coming quarters bode better for KO than, say, Caterpillar (CAT). There are plenty of people more willing to spring for a Coke than a backhoe. The point is, KO’s market is much more flexible than other U.S. multinationals that serve customers abroad, and a few extra euros or pesos is the difference in that purchase.

Also bear in mind that KO stock has been a solid dividend-payer for a very long time. It has upped its dividend every quarter for the past 50 consecutive years. That is a stunning record. Currently, the dividend is slightly above 3%.

KO Stock Will Benefit From Strategic Partnerships

What’s more, most of the bad news is behind KO. Management adjusted to new global conditions by proactively restructuring operations in late 2014. Now, those changes have been absorbed and cost saving looks to be on the order of $4 billion-$6 billion flowing back to the bottom line this year.

KO shed its volatile relationship with Keurig Green Mountain (KGMC) in late 2015 and actually came out slightly ahead on the deal.

Its other partnership is with Monster Beverage (MNST), where it provides international distribution of the energy drinks in exchange for a share of the proceeds.

This is a very promising partnership as energy drinks continue to be one of the hottest growth sectors both in the U.S. and abroad. It was also helpful for KO stock that MNST absorbed KO’s flagging energy drink brands in the partnership. That left KO to do it what it does best — get products into markets — and MNST could stick to its knitting — selling energy drinks.

These kinds of strategic partnerships keep risk down as well. Instead of KO having to start a division and staff it (and hope it all works out), it can instead buy into an established player and build a win-win deal with the partner company. If it doesn’t work out, KO can walk away and still be out less than having to shed an entire division.

This is a good time to get in on a rock-solid total-return stock at a good price. Given its dividend, this isn’t a trade, but an investment in a global powerhouse that knows how to win in virtually any type of market.

Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/ko-making-comeback/.

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