﻿How Coca Cola Stock Made Investors Millionaires Hook-
Imagine the year is 1970. Every Night, After coming home from a long day of
work you like to have a cold glass of Coca Cola with your dinner. That holiday season,
you got a generous $500 dollar bonus from work and decided to invest it all into your favorite soda
company. Little did you know that investment would eventually make you a millionaire.
In this video, I’m going to explain why Coca Cola Stock provided such a great return,
give real life-examples of Coca-Cola Millionaires, and project what you can expect for future
returns. Intro-
My name is Zach and you should leave a like and subscribe to the channel if you enjoy the video.
Today, I want to explain how Coca Cola stock made investors millionaires. The reason for
me sharing this is to demonstrate the power of long term dividend investing. When Dividends
are reinvested over a long time horizon it creates a powerful compounding effect. This
is best practiced in companies with sustainable competitive advantages, like Coca Cola.
Content- Founded in 1892,
The Coca Cola Company created one of the most iconic brands of all time. By 1919, Coca-Cola
became a publicly traded company listed on the New York Stock Exchange under the ticker symbol "KO".
If you had purchased just one share of the stock at its IPO for $40, and reinvested all the
dividends, it would now be worth over $10 Million Dollars. However, you did not have to invest that
early in order to see a significant return. Let's go back to our 1970 example I mentioned earlier.
You invest your entire $500 bonus into Coca Cola. By 2020, that investment would be worth over
$1.3 Million, which is an annual return of 16.68%. The website used for that calculation is linked
in the description below. The total return is calculated under the assumption that dividends
are being reinvested. The lionshare of this return is due to this principle of dividend reinvestment.
The reasoning for this is that you’re buying more shares of the stock with your dividend,
which increases your next dividend payout, increasing the amount of shares you can buy next,
thus increasing your payouts even more, creating a snowball effect that compounds
overtime. On top of this, the dividend payout itself will increase overtime,
as long as the company continues to grow it’s profits. For example, The Coca Cola Company has
seen 58 years of consecutive dividend growth. So that theoretical 1970 investment could have
turned you into a millionaire. However, there are countless real people who had their lives
changed by Coca Cola Stock. Perhaps the best example of this is the town of Quincy, Florida.
The story starts in the Great Depression with a local banker named Mark Welch Munroe. He had the
keen observation that no matter how impoverished the person or how dire their financial situation,
they’d always spend their last nickel on a glass of Coca-Cola. This fact motivated him
to buy shares as fast as he could. Whenever a person came into his bank for a loan, he’d
encourage them to take out extra cash for shares. Overtime, he had convinced many local farmers,
grocers, and teachers to invest in The Coca Cola Company. Most importantly, he urged them to hold
no matter what short-term market fluctuations occurred. The results were staggering.
Eventually, Quincy became the richest town per capita across the entire United States.
It’s estimated that at least 67 of the town’s original 4,000 population amassed grand fortunes,
making them Coca Cola Millionaires. They created generational wealth that changed
the course of their lives and their families. This prosperity had a spillover effect that
helped the town as well. The dividends from the Coca-Cola shares kept the local economy alive in
times of need – ensuring Quincy survived the Great Depression and every recession
since. For perspective, a single Coca-Cola share from Munroe’s era with dividends reinvested is
worth over $10 million and pays around $270,000 a year in dividends. Many of these people had bought
far more than just 1 share. 100 shares with dividends reinvested would be worth
over $1 billion dollars. Just Incredible. Perhaps the most famous Coca Cola Investor
is Warren Buffett. He was much later to the party than the town of Quincy, but that didn’t stop him
from seeing incredible returns. He started his position in 1988, purchasing 6.2% of the company
for $1 Billion dollars. He’s added to it over the years, but chooses not to reinvest dividends,
as being one of the greatest investors of all time he can grow the money faster
picking stocks himself. In 2020, Buffett owns 9.3% of the company, worth nearly $22 Billion
dollars. This year, that investment will pay him more than $656 million in dividend income.
With an initial cost basis of $3.245 per share, Buffett now boasts a 50.5% dividend yield on
cost. This means that he is more than doubling his initial investment every 2 years, through
dividends alone. Buffett has stated that he will never sell a share of the Coca Cola Company.
These investment examples demonstrate the power of investing in companies with strong competitive
advantages and holding long term. Bonus-
But what kind of return can you expect from Coca Cola Today? To find out let’s create a model to
project future performance. For this model, I took the historical data of the stock and projected
them forward over 35 years. So I used the compound annual growth rate of the dividend, based on the
last 5 years, which is 5.57%, and the compound annual growth rate of the stock price, based
on the last 10 years, which is conservatively around 5%, and projected these rates forward.
This model is based on the assumption that the company will grow at a similar rate to recent
history. Also, we need to plug in the current stock price and annual dividend payment.
Now, Let’s look at how a 1 time investment of $1,000 will perform over 35 years.
In the end, we have a total value of $16,835.42 when reinvesting dividends and $5,662.65 when
not reinvesting dividends. This is a massive difference of $11,172.77. It should be noted
that although the total value is much lower, you would receive all of the dividend payouts, which
amounts to $3,012.27. So in totality you earned $8,674.92 when you don’t reinvest the dividends,
which is still significantly lower than the nearly $17,000 you have in value if you reinvest the
dividends. This demonstrates the powerful snowball effect of dividend reinvestment which I mentioned
earlier. After 35 years, with reinvestment, you would receive an annual dividend of 54.64%
your initial cost. So if you invest more money your overall return will be larger,
but the percentage return will remain the same. Let’s say you wanted to do a more comprehensive
strategy and dollar cost average into Coca Cola, investing $100 every month. At the end
of 35 years with reinvestment, you’d have a total value of $237,751.16 and an annual dividend of
$7,696.50, which is an 18.41% yield on cost. This is all off $41,800 total dollars invested.
Once again, the percentage return will be the same when you increase the dollar amount.
If you invest $500 every month, then the total value would be $1.18 million dollars and you could
become a Coca Cola Millionaire as well. It’s important to mention that this is a
projection based on prior performance and is obviously going to have a great deal of
variation under real conditions. Coca Cola will likely not provide the returns of decades past,
but can provide you with reliable and growing cash flow. Plus, if the video game fallout is
any indication, then bottle caps could become the post-apocalyptic currency.
If you want to learn more about The Coca Cola Company I did a full stock review on it,
which I will link in the description. That was only my fourth video fourth video on the
channel when I had a whopping 20 subscribers so bear with the quality. Be sure to let me know
in the comments if you'd like to see an updated Coca Cola stock review when they release their
2020 annual report. Call To Action-
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