Decrease of 15% in Growth Stock Offers Attractive Buying Opportunity Now
There's no wrong time to purchase a solid stock, although some moments may be better than others for making a new investment. Lower your initial investment cost, and your eventual gain will be higher.
With this in mind, growth-focused investors might want to take a chance on a new share in Coca-Cola (KO 0.49%) while its shares are trading 15% lower than their early September peak. Such a significant discount is rarely seen. Grab the opportunity while you still can.
Coca-Cola's business is quite sturdy
While some might question whether Coca-Cola fits the criteria for a growth stock, what with its single-digit sales growth being the norm, investors who follow the company are aware that part of the reason for the recent stock slide was a slight decrease in product volume sold in the last quarter. This dip was anticipated by the market before the official third-quarter results were released last month. It seems that consumers are still being frugal.
However, when you look at the bigger picture, Coca-Cola's top- and bottom-line growth may lack in size but it makes up for that with remarkable consistency.
Investors who are in-the-know will eagerly point out that last quarter's revenue actually decreased for the first time since late 2020. Closer inspection reveals that organic revenue grew an impressive 9%, attributable to the consumer's willingness to accept price increases despite their perceived financial constraints. Coca-Cola's strong brands, including Gold Peak tea, Minute Maid juices, and Powerade sports drink, as well as its iconic cola, have the power to navigate through any economic challenges.
It's interesting to note that Coca-Cola's slow-growth business is capable of generating returns similar to those of traditional growth stocks, just in a different way.
An alternate route to growth
Though Coca-Cola might not be a high-growth organization, it operates within a cash-rich business. Operating and net profit margins consistently exceed 20%, providing a solid foundation for its dividends, which have been increasing annually for the past 62 years.
Even if dividend income isn't your primary objective, the opportunity to reinvest these dividends in more shares of the stock paying them should not be overlooked.
Although Coca-Cola's typical dividend yield rarely surpasses 3%, its quarterly dividend has climbed from $0.195 per share three decades ago to $0.485 now. Furthermore, during this period, the stock price has improved from just under $13 to slightly over $63. Both developments are commendable, yet not groundbreaking. However, had you reinvested all of these dividend payments in additional shares of a rising Coca-Cola stock during this time, a $10,000 investment then would be worth over $100,000 today.
That's an average compounded annual growth rate of approximately 8%, which is almost the yearly growth you'd expect from typical growth stocks.
Chances abound
It might be challenging for investors who have only sought growth through growth stocks to shift their approach and seek growth through dividend-paying stocks. But numbers don't lie: patience can pay off.
Yes, you might be able to do slightly better with most established technology stocks. You would likely encounter more volatility – and stress – with those tickers, though. Coca-Cola is one of those stocks that you can buy and hold for several years without worrying about constant monitoring.
More importantly, the opportunity to buy Coca-Cola stock at a significant discount, such as the one presented currently, doesn't come around often. Jump on it while you still can.
Investors looking to diversify their finance portfolio might consider investing in Coca-Cola, given its consistent top- and bottom-line growth, despite single-digit sales growth being the norm. This consistency, coupled with its strong dividend history, makes it an attractive option for long-term investing.
Furthermore, the current discount on Coca-Cola shares could offer a great opportunity for investors who are keen on finance and investing, allowing them to potentially increase their returns by lowering their initial investment cost.
