Are you missing out on Coca-Cola Amatil Ltd’s 7% dividend yield?

Are you missing out on Coca-Cola Amatil Ltd's 7% dividend yield?

Experts agree that Coca-Cola Amatil (ASX:CCA) can turn it around.

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published October 7, 2014 5:51 am AEDT

Coca-Cola Amatil Ltd (ASX: CCL) is one of the most recognisable and well researched companies on the ASX, yet investors don't seem to be willing to invest for the long term.

As the bottler of Coca-Cola and associated beverages in the Asia Pacific region, Coca-Cola Amatil has been a portfolio mainstay for conservative investors over many years. This can be at least partially attributed to the great Warren Buffett's love of the company's parent and 29% shareholder The Coca Cola Company.

Coca-Cola Amatil was terrifically consistent between 2006 and 2012 but broker interest has peaked during the last 12 months after the company reported a fall in profit and a marked shift in local conditions. Indeed my data provider shows no less than 15 analysts' estimates of Coca-Cola Amatil's future earnings, the same as Commonwealth Bank of Australia (ASX: CBA).

Problems Mounting

Coca-Cola Amatil reported a fall in local margins, a massive restructure of operations, and sizeable drop in profit which has forced the share price to fall 30% this year to new five-year lows. This appears to have enticed more brokers to look at the company as a value play.

Value Emerging

Consider the following analyst estimates gathered from my data provider;

The mean estimate of fair value is $9.05, 3% above the current price
Revenue is predicted to be flat at $5.1 billion
Normalised earnings per share are estimated at 52 cents, 22% lower than last year
Dividend per share is estimated to be 46 cents for the 2014 financial year

At the current price of around $8.75, Coca-Cola Amatil is trading on a forward (end of 2014) price to earnings ratio of 16.8 and a 2014 dividend yield of 5.3%, 75% franked, or 7% gross. In the 2015 financial year these numbers are estimated to change to 15.9 and 7.2% respectively. Coca-Cola Amatil's long-term average PE ratio is around 17.

Are you missing out?

So the question is, with expectations that Coca-Cola's management team can turn around the company's trouble points, are you positioned to benefit from the big 7% yield?

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.