Well, several days ago, I purchased our first investment – shares in the Coca-Cola company (ticker: KO). I bought at a share price of $38.03, representing about a 3.2% dividend yield given the recent increase to $0.305 payout per quarter. Coke has been paying and increasing its dividend for over 50 years – a feat not many companies accomplish.
Coke has one of the biggest brands in the world, and sells products in over 200 countries, serving over 1.7 billion servings per day. It is a business with a high return on equity (historically above 25%), lots of pricing power, and a stable of great brands that people the world over connect with. Growth last year was a little slow for the company, which seemed to spook some investors, driving the price down over the past few months. It seems though that a lot of this can be attributed to currency fluctuations across the world, which should sort itself over time.
When I purchased the stock, Coke was trading for a PE of just under 20, which is bordering on the “expensive” side for those investors who have a value-oriented philosophy. However, I think the price is fair, given the quality of the company. As Warren Buffet famously quoted, “I’d rather buy an excellent company at a fair price, than a fair company at an excellent price.” Although there are definitely other companies I have my eye on right now that offer better yields, I thought it would be more prudent to start investing simply, and right now I can confidently say that I fundamentally understand how Coca-Cola makes money and that I expect earnings to increase over the long term.
Now, I know I have mentioned before that I have wrestled with the “when” of investing. I hold the general philosophy that one should get completely out of debt before investing because results come faster when you stay focused. However, given that the only debt we have is fixed and at a very low interest rate, I figured it wouldn’t be too rash to put some money on the table. After all, you can’t really progress through the learning curve of anything if you don’t have any skin in the game. I expect this holding to sit on my family’s balance sheet for decades to come – sort of an experiment if you will. I can imagine the satisfaction on the future me’s face when he looks at his account and goes, “well, that was a pretty damn good decision!”. And if for some reason Coke fails and we all stick to drinking from public fountains – well that’s what diversification is for. I hope to be doing some more of that as time goes on, and Mrs. Mase and I are able to allocate more capital to good investments.
And, since this is the Mrs. and I’s first stock (and investment, period) I decided to pick up a little memento to commemorate the occasion: