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What makes Coca-Cola Amatil Ltd a top stock to buy now?

It is our job as value investors to find stocks that have the potential to smash the market’s returns in the long run. It might sound like a fairly straightforward task, but in reality, there are a number of factors that need to be considered.

The share price and dividends paid are often the first factors that investors look for in a good investment but brand strength and other sustainable competitive advantages also need to be reflected on. One company that immediately comes to mind is beverage manufacturer Coca-Cola Amatil Ltd (ASX: CCL).

‘But Ryan, have you been following the stock market at all over the last 18 months?’ I hear you asking.

And your objection would be completely justifiable, considering the stock is down 44% since its all-time high in March 2013. The stock has fallen drastically on the back of declining sales and numerous profit warnings, giving many investors good reason to give the stock the widest berth possible. So what could I possibly see in this stock?

A top stock to buy now

Now trading at just $8.65, Coca-Cola Amatil’s shares haven’t ventured this low since early 2009. As a value investor I would have to argue this is the opportune time to stock up, considering its brands are amongst the strongest and most well known in the world.

Recognising the troubles facing the business, Coca-Cola Amatil’s management team has implemented a strategic review aimed at reducing costs and improving productivity while also exploring ways to strengthen the brand’s image going forward. To begin with, it will focus more on marketing campaigns while more capital will also be pumped into product development.

Speaking of product development, the company has recently begun marketing its new 250ml can, designed to allow customers to enjoy the product at a much more affordable price. While it will cost consumers no more than $2 per can, it will also be a healthier alternative for consumers wanting to watch their waistlines.

I acknowledge that these initiatives certainly won’t resolve the company’s issues overnight, and investors could be in for more pain over the coming months. However, I do believe in the company’s ability to turn its woes around and deliver for shareholders who remain patient.

In part, this will come in the form of fantastic dividend yields. As it stands, Coca-Cola Amatil is expected to distribute 45.5 cents per share in FY15, giving it a forecast dividend yield of 5.3%, franked to 75%.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil Ltd.

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