Here are some recent stocks I bought for my portfolio — all part of my plan to one day become financially independent.
35 Shares of KO (Coca Cola)
I can’t imagine there is a single air breathing humanoid on this planet (over the age of 10) that hasn’t ever heard of Cola Cola or seen its ubiquitous red logo. What most people don’t realize is that Coca Coca is actually a food company that owns/licenses well over 500 different types of drinks around the world. Besides the carbonated black drink that everybody seems to love, Coca Cola (the company) also sells various types of juices, bottled water, sport drinks, energy drinks, teas, and coffees. It also sells products on every continent except Antartica.
Those who follow investing in the news also know that Coca Cola is one of Warren Buffet’s top 4 stocks — the other three being IBM, Wells Fargo and American Express. Although nobody knows Buffet’s exact methodology for choosing stocks to buy, it’s generally understood that he gravitates to companies that: a.) have huge growth potential and b.) have a history of rewarding investors with regular dividends. It should therefore be no surprise to anyone that Coca Cola has been a regular on the Dividend Aristocrat’s list — which means that Coca Cola has consistently paid out and increased its dividends for at least the last 20+ consecutive years.
So why did I choose Coca Cola?
There are a couple of reasons:
- Coca Cola is more or less a given in any dividend portfolio. In terms of American dividend paying stocks, it sits up there with Johnson & Johnson and Emerson Electric; in other words, it couldn’t be more boring as far stock picking goes. That being said, I’ve yet to meet a single person who hasn’t made money with Coca Cola over the long term.
- I track my trading accounts in Canadian dollars, which if you weren’t aware, has gone down against the US Dollar in the last few years. While this is good news for those who bought American securities before the decline, it’s bad news for those of us buying US stocks today. Should the Canadian dollar eventually go back up, it’ll mean that the value of my American stocks will go down (relative to the CA dollar). Therefore I wanted a safe US stock that I can reasonably expect to gain in value over the long term — the end goal being to decrease the possibility that I’ll be hit with the double whammy of an increasing CA dollar and declining stock value.
- I wanted to diversify my portfolio and invest in different sectors that I am currently invested in. Right now my portfolio is heavily focused on the technology and service industry. I have nothing in the consumer goods sector, which is something I’ve been wanting to invest in for a while. Coca Coca seemed like an obvious fit.
- I wanted to buy a safe American stock since I’ll be buying this stock in my RRSP. All of my holdings are in either RRSPs or TFSAs, which are both registered accounts here in Canada. Unfortunately, what I didn’t know (until it was too late) was that the US government withholds taxes on US-based dividends unless the corresponding stocks are held in an RRSP. I currently own Johnson & Johnson and Caterpillar stocks, both of which I bought in my TFSA account. Consequently whenever I get dividends from either of these two companies, I lose money by having to pay US taxes. Lesson learned.
- This one is a negative: I’m consciously buying KO at a high point. Last I checked, Coca Cola was trading at around $45, which is only two dollars less than its 52 week high point. The stock itself has almost never been higher (if you factor in splits). This is generally a bad idea, especially if you’re a the type of trader who’s always looking for good deals. Short of a stock crash, however, I doubt we’ll see Coca Cola stocks go on a sale anytime soon. No better time than the present.
Here are some quick facts about Coca Cola (info taken May 9th, 2016)
52wk Range: $36.56 to $47.13
Market Cap: 195.72B
Div & Yield: 1.40 (3.10%)
As always, thanks for reading!