Coca-Cola Adopts 1990's Strategy: 2-for-1 Stock Split (KO, PEP)

The Coca-Cola Company (NYSE: KO) is going to try a new strategy that we have not seen from the company since literally the 1990s… It is splitting its shares.

The company’s board of directors announced that it has voted to recommend a two-for-one stock split.  While this would be the first split in 16 years, it is the 11th stock split in its 92-year history.  The company will effectively increase the number of authorized shares from 5.6 billion shares to 11.2 billion shares and this and other matters will be voted on at a special shareowners meeting anticipated to be held on July 10, 2012.

Keep in mind that Pepsico, Inc. (NYSE: PEP) reports earnings this week.  Pepsi’s dividend yield is 3.1% and Coca-Cola’s dividend yield is 2.8%. It has been almost equally long since Pepsi had a stock split and the Pepsi price of $66.51 against a price of $74.12 for Coca-Cola.

On a longer-term basis, Coca-Cola intends to double its revenues this decade.  It is a plan that “provides a clear roadmap for creating value for our consumers, customers, bottling partners and shareowners.”

JON C. OGG