Title: Should You Invest in Coca-Cola or Sirius XM: A Comparison of Dividend Growth Stocks
Dive into the world of dividend-focused investing with two standout contenders: Coca-Cola (KO, 1.43%) and Sirius XM (SIRI, -6.71%). Although these giants operate in distinct industries, income-hungry investors can find compelling reasons to appreciate both stocks.
Coca-Cola lures income-seekers with its iconic brand lineup and an impressive 62-year streak of annual dividend increases. Meanwhile, Sirius XM compensates for its shorter dividend history by providing rapid payout boosts. As America's sole satellite radio provider, Sirius XM has more than doubled its dividend payouts since 2019.
Both companies excel in shareholder rewards, but which one offers the most promising passive income for future years? Let's peer beneath the hood to determine which stock could deliver the most lucrative income to patient investors.
Coca-Cola
Coca-Cola might be a household name, but its flagship beverage isn't the brand's only proud achievement. D diet Coke, Sprite, and Fanta are just a few of over 20 billion-dollar brands that contribute to their annual revenues.
Though the popularity of sugary sodas is on the decline, Coca-Cola confronts this challenge with agility. To cater to evolving consumer preferences, the company boosts its offerings in the water, sports, and tea categories. These new brands shore up a dividend rewarding a 3.1% yield at current prices.
Throughout 2024's first nine months, unit case volume dipped slightly in North America. A rise in Latin American sales helped offset the North American loss, resulting in a 1% annual growth for global unit case volume.
Although the quantity of beverages sold isn't expanding rapidly, Coca-Cola's renowned brands establish a strong pricing power. Organic revenue, which disregards exchange rate fluctuations, swelled by 12% year over year in the same period.
Soda demand has waned for decades, but overall beverage sales generally maintain a steady climb. In the third quarter, Coca-Cola raked in $7.6 billion in free cash flow, ignoring a $6 billion IRS tax litigation deposit. This solid cash flow can support future dividend increases and also aid in acquiring up-and-coming beverage brands to safeguard against competition.
Sirius XM
In contrast to Coca-Cola, Sirius XM faces little competition within its satellite radio niche in North America. Although this market isn't as bustling as it once was, reliable subscription revenues have enabled Sirius XM to boost its dividend payouts by 103% since 2019. At the moment, Sirius XM's stock offers a 3.8% dividend yield. Although this yield is higher than Coca-Cola's, dividend growth and sales are slowing down as newer music streaming services, like Spotify, gain popularity.
This year, Sirius XM upped its dividend payout to $0.27 per share by one-third of a cent. Whilst holding back on a large dividend increase, Sirius XM anticipates implementing more substantial raises as it navigates post-spinoff and reverse stock split challenges.
Over the past 12 months, Sirius XM comfortably covered its dividend obligations with free cash flow generated from operations, allocating only 42% of it towards dividend payments.
However, Sirius XM's appeal has faded as more consumers adopt music streaming services, like Spotify, in their vehicles. Q3 revenues dipped by 5% year over year due to a smaller base of paid subscribers. Compared to Spotify's Q3 revenue surge of 21%, Sirius XM's decline showcases growing competition in the market.
Which Stock to Opt For
Spotify boasts about 68 million paid subscribers in North America, more than double Sirius XM's subscriber count. While Sirius XM's robust cash flows support a high-yield dividend currently, increasing that payout may become more challenging if its subscriber count stagnates or declines.
Coca-Cola may offer a lower yield compared to Sirius XM right now, but it boasts a steady track record, a diverse portfolio, and a strong financial performance. Coca-Cola is likely to deliver more dividend income down the line, making it the fresher and more inviting buy for income-seeking investors.
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Investors looking for stable dividend income might find interest in Coca-Cola's long-term finance strategy, as its 62-year streak of annual dividend increases suggests a commitment to return money to shareholders.
For those considering dividend-focused investing, both Coca-Cola and Sirius XM present compelling finance options with their respective stock performances and dividend yields.
