The Coca-Cola Company has been producing growing earnings for the shareholders consistently over the past decades. Not only has the earnings been growing over the last 30 years since Warren Buffet’s Berkshire Hathaway bought its ownership in 1989, but for a long time before that too. The wonderful company of Coca-Cola was founded in 1886, and it’s been growing its dividends annually for over 50 years. The yearly growth rate has been quite decent, about six percent, outpacing inflation by a good margin.
If you were an owner, shareholder, of The Coca-Cola Company, you would be entitled to a part of the earnings that the company produces for its shareholders.
How it works is that board of the company suggests how much of the earnings be paid out as a dividend, and the shareholders vote upon it in the general assembly. The part of the earnings that the company does not pay out as a dividend remains in the business as capital, which can be used to grow the business and the earnings even more.
Historically the company has retained a major part of its earnings and used the capital for further growth, as well as share buybacks. Yet it has been able to grow its dividends every year.
We’ll cover share buybacks in a later post.