9. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders as of Q4: 81
Citadel Investment Group’s Equity Stake: $623.75 Million
The Coca-Cola Company (NYSE:KO), a multinational beverage corporation established in 1892, is evaluating a potential shift toward increased plastic bottle usage in the U.S. due to rising aluminum costs. CEO James Quincey stated that the 25% import tax on steel and aluminum, imposed by President Trump to boost domestic manufacturing, may lead the company to rely more on PET plastic bottles if aluminum prices surge. While packaging costs are a relatively small portion of overall expenses, Coca-Cola is prepared to implement strategies to maintain affordability and consumer demand. Quincey downplayed the tariff’s impact, emphasizing that while it is notable, it will not drastically alter the company’s multibillion-dollar U.S. business. Additionally, the company is exploring mitigation strategies, such as hedging programs and sourcing aluminum domestically.
This possible shift comes as The Coca-Cola Company (NYSE:KO) faces mounting pressure from environmental groups that have labeled it the world’s top plastic polluter for six consecutive years. The company has increasingly leaned on aluminum cans to align with sustainability efforts and appeal to eco-conscious consumers, despite the material’s higher cost. A move back to plastic, even temporarily, could put Coca-Cola at odds with environmental advocates and consumers pushing for reductions in single-use plastics. Despite these sustainability concerns, the company’s financial performance remains strong, with fourth-quarter 2024 results exceeding analyst expectations. Revenue climbed 6% to $11.54 billion, and net income rose 11% to $2.2 billion. Organic revenue grew by 14%, driven by price increases and heightened demand in key markets such as the U.S., China, and Brazil.
On February 25, 2025, The Coca-Cola Company (NYSE:KO)’s Board of Directors approved its 63rd consecutive annual dividend increase, raising the quarterly dividend by 5.2% from $0.485 to $0.51 per share. This brings the annual dividend to $2.04 per share, up from $1.94 in 2024. The first-quarter dividend will be paid on April 1 to shareholders of record as of March 14. In 2024, Coca-Cola returned $8.4 billion in dividends to shareholders, contributing to a total of $93.1 billion in dividends paid since 2010.
Hayden Capital made the following comment about The Coca-Cola Company (NYSE:KO) in its third 2023 investor letter:
“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, The Coca-Cola Company (NYSE:KO) trades at ~30x P/E despite having the same earnings as 10 years ago.
Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.
I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Coca-Cola is facing disruption risk from consumers shifting to new, heathier beverage brands.
But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.”
Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”
