Coca-Cola Amatil Ltd (ASX: CCL) has gained its fair share of critics over the last year or so as its share price has plummeted back towards post-GFC levels. With many now questioning the company's future prospects, it's up to smart investors to make up up their own mind.
Here are five reasons I think Coca-Cola Amatil is still a great long-term bet.
1) Price War. The pricing war with rival Schweppes has had a huge impact on Coca-Cola Amatil's profits. However, it needs to be acknowledged that it is also affecting Schweppes' own margins, so it can't keep up these low prices forever.
2) Brand Strength. Investors should not underestimate the strength of Coca-Cola Amatil's brand portfolio. Regardless of how aggressive Schweppes is with its pricing, Coca-Cola will always dominate the shelves.
3) Yield. Although the short-term outlook for CCA remains cloudy, shareholders (myself included) can enjoy its bumper dividend yield until conditions start to improve. According to revised Morningstar estimates, the company is expected to distribute 46.5 cents per share in 2015 which puts it on a yield of 5%, franked to 75%.
4) Review. In light of its poor performance recently, the company's new management is undertaking a strategic review to improve productivity and reduce costs. Some estimates suggest up to $100 million in costs could be removed annually which would significantly boost profitability.
5) Price. Investing in a high quality company would be pointless if it wasn't trading at a reasonable price. At just $9.25, the company is trading at a level not seen since just after the global financial crisis, giving investors an excellent opportunity to stock up.
An even better bet than Coca-Cola Amatil
Coca-Cola Amatil is a high quality corporation trading at a very reasonable price. While I bought a stake in the company when shares were priced at $9.39, I am strongly considering increasing my holdings.
