Why the Coca-Cola Amatil share price is at a 52-week high

Here's why the Coca-Cola Amatil Ltd (ASX: CCL) share price is trading at new 52-week highs.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The markets had a surprisingly good day yesterday, with the S&P/ASX 200 (INDEXASX: XJO) booking a 1.35% gain to finish the day at 6,826 points.

After fears over rising tensions between the US and Iran gripped global markets, we had a pretty torrid start to the week, so yesterday's gains would have helped investors breathe a fleeting sigh of relief.

What was even more surprising was the share price of Coca-Cola Amatil Ltd (ASX: CCL), which yesterday booked a 4.91% gain to finish the day at $11.54, after reaching as high as $11.60 just before market close.

It's a new 52-week high for the soft-drink bottler – and is also CCL's highest share price level in 6 years.

What makes this move a little odd is that there were no major announcements by the company – or any company news at all – that might have explained such a decisive share price movement.

In fact, just last week, Citi bank put out a broker note with a 'sell' rating on CCL shares and a $9.70 price target, noting the possible negative impacts that might come from implementation of a container deposit scheme in Victoria.

So why are CCL shares trading at 52-week highs?

Well, I think the answer is the hunt for 'safe', defensive and reliable yields that the current low interest rate environment is fostering.

If we look at companies like Woolworths Group Ltd (ASX: WOW), APA Group (ASX: APA) and Sydney Airport Holdings Pty Ltd (ASX: SYD), all 3 stocks are trading with abnormally high price-to-earnings ratios these days. WOW shares are going for 32.5x earnings at the current time. APA shares are asking 46x earnings, while SYD is sitting on 49x.

Coca-Cola Amatil shares are still only trading on 28.9x earnings, but this ratio is still high for a lower-growth company like Coca-Cola and has also been steadily climbing over the past year.

The company also pays a solid 4.07% dividend yield on current prices, which has also been steadily rising over the past few years.

During times of economic downturn or recession, consumers are unlikely to stop treating themselves with a Coke, flavoured milk, iced coffee or any other of the drinks that Coca-Cola produces, making the company's earnings (and dividends) somewhat recession-resistant. This makes Amatil a defensive consumer play and is what I believe is attracting investors to CCL shares in this brave new world of low interest rates.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings 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.

More on Share Market News

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Beetaloo, Botanix, Cobram Estate, and Origin Energy shares are falling today

These shares are having a poor session on Tuesday. But why?

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »