Why I think Coca-Cola Amatil is a top ASX dividend stock

Here's why I think Coca-Cola Amatil Ltd (ASX: CCL) is a top ASX dividend stock

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When it comes to picking top ASX dividend stocks, Coca-Cola Amatil Ltd (ASX: CCL) isn't usually on the top of most income investors' Christmas lists. Why go for Coke when there's the Commonwealth Bank of Australia (ASX: CBA) and the other big four banks, Wesfarmers Ltd (ASX: WES) or Telstra Corporation Ltd (ASX: TLS) to choose from?

Well, here's why I think CCL shares would fit nicely in a dividend investor's portfolio.

Brands

Everyone would be familiar with Coke's world-famous stable of soft drink names – Coke, Vanilla Coke, Diet Coke, Fanta, Sprite and Lift are all iconic labels that define their categories. The Kirks selection is also a nice nod to the local Aussie market.

But what isn't obvious is Coca-Cola Amatil's dominance of other drink categories. The company also owns the popular Mount Franklin bottled water label, sports-drink Powerade, Cascade and Deep Spring sparkling waters, Fuze Iced Tea, Zico Coconut Water, Vitamin Water, the Monster and Mother energy drinks, Barista Bros. Iced Coffee… the list goes on.

Coca-Cola Amatil also has bottling licenses for popular alcoholic beverages like Canadian Club, Maker's Mark bourbon, Laphroaig Scotch whiskey and several varieties of the iconic Jim Beam label.

As you can see, this company dominates the drinks space in Australia like no other. Having such a large stable of iconic brands is a valuable long-term competitive advantage, in my opinion.

Dividends

Coca-Cola Amatil paid a dividend of 51 cents per share in 2019, which on today's share price translates into a solid 4.25% yield. The company has also been growing its dividend since 2015, and I think the company's just-completed 2-year transformation and cost-cutting plan that will allow larger dividend growth down the road.

I also think Coca-Cola is a very defensive company. Buying drinks is not something that people will typically stop doing in an economic downturn or recession, which makes its dividend just that much more desirable in my view.

Foolish takeaway

Judging by Coke's enviable stable of brands and its dividend history, I think this company would make a great addition to any income-focused portfolio. Also, CCA's parent company over in the US is one of Warren Buffett's favourite stocks. I can't think of a better endorsement than that!

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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