For Long-Term Growth and Stability, Coke Is It

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tdp2664 InvestorPlace I just shake my head in disbelief at some companies. Somehow, these companies keep growing even though it seems like they should’ve gone stagnant long ago. If anything, it’s a testament to just how big the world really is, and how many products a company might have that you didn’t even know about. Coca-Cola (NYSE: KO ) has hundreds of brands most people will never hear of because many are unique to various regions. The Wikipedia page shows you exactly what the story is, but a quick scan yields these familiar names: Coke, Fanta, Dasani, Bacardi Mixers, Mello Yello, Enviga, Five Alive, Full Throttle, Fuze, Godiva Coffee/Chocolate drink, Hi-C, Lift, Minute Maid, Nestea, Odwalla, Seagram’s, Simply Orange and Smart. No wonder the company still is growing. No wonder Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A ) owns it. The financials for the company are nothing short of staggering. Did you think people could consume enough Coca-Cola products to generate $46.58 billion in revenue this year? Neither did I. And that number is projected to grow another 5% to $49 billion next year. This is supposed to generate earnings of $3.88 per share this year (13% growth) and $4.30 next year (11% growth). The five-year projected annualized earnings growth rate is pegged at 9.23%. Some might look at the stock’s $67 price tag, do the math and ask why they should pay 17 times earnings for a stock whose growth rate is half that. It’s a fair questions, and that’s why certain companies deserve a premium because of their brand name, financial stability, dividend payout, management and cash flow. If all the varying factors come together in the right way, that price can seem downright cheap for what one gets. In each of the last three full fiscal years, which includes the recession, Coca-Cola generated free cash flow of $7.33 billion, $6.19 billion and $5.61 billion, respectively. Coca-Cola is generous to its shareholders, paying out dividends of $4.07 billion, $3.8 billion and $3.5 billion, respectively, in those years. So Coca-Cola is giving roughly 60% of its free cash back to its shareholders. Right now, that translates to a 2.8% yield. Coke sits on more than $11 billion in cash, by the way. And yet, the company’s balance sheet is so solid, KO chose to draw down $9 billion in debt in 2010 to further grow the company, and its $14 billion in total debt is only costing Coke about 5% per year. Oh, and one more thing. You know who else thinks shares of Coca-Cola are so cheap that he purchased 525,000 shares in recent months at prices between $61 and $64? None other than IAC/InterActiveCorp ( NASDAQ : IACI ) chairman and legendary media mogul Barry Diller. You do the math. I say Coca-Cola is a buy right here, right now, for the very long term. Lawrence Meyers owns shares of Coca-Cola.