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Here's How Many Shares of Coca-Cola You Should Own to Get $5,000 in Yearly Dividends

Source The Motley Fool

Coca-Cola (NYSE: KO) has a long history. It began in the 1890s and continues to focus on beverages.

Part of the company's history includes raising dividends. It's done that for 63 straight years, an impressive feat that makes the company a Dividend King. This group of companies has increased payouts annually for at least 50 straight years.

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Can Coca-Cola sustain its dividend payments? After checking the financials to make that determination, how many shares do you need to own to receive $5,000 in yearly payouts?

Someone picking out a can of soda at the store.

Image source: Getty Images.

Dividend sustainability

A couple of months ago, the Coca-Cola board of directors raised the quarterly dividend by over 5% to $0.51 a share. A dividend increase of that magnitude often signals the board's confidence about the company's prospects.

It's important to look deeper to determine if the company can afford the payout. Its 79% payout ratio indicates it can, since that compares dividends to earnings.

We can figure out the number of shares you'll need to own if you're targeting $5,000 in payments.

Basic calculations

The $0.51 per-share quarterly dividend translates into $2.04 a year. Dividing $5,000 by $2.04 equals about 2,451 shares. With a share price of $73 as of April 17, you'd need to invest nearly $179,000.

Of course, this assumes that the board of directors keeps dividends constant. Should the company continue raising them, you'd receive more than $5,000 per year with a $179,000 investment.

Based on its new quarterly dividend rate, Coca-Cola stock has a 2.8% dividend yield. That's double the S&P 500 index's yield.

Given the company's willingness and ability to pay dividends, its history of increases, and relatively high yield, investors seeking dividends should strongly consider a position in Coca-Cola stock.

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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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