Coke Seen Risking Payout Growth by Wintergreen: Chart of the Day

Coca-Cola Co.’s half-century streak of yearly dividend increases is in jeopardy because the beverage maker is “routinely outspending its cash flow,” according to David Winters, Wintergreen Advisers LLC’s co-founder and chief executive officer.

The CHART OF THE DAY compares Coke’s cash flow from operations with its total outlays for dividends, stock buybacks and capital spending in each year since 2000, according to data compiled by Bloomberg. Totals for the 12 months ended Sept. 30 are shown as 2014.

Coke spent $2.2 billion more than its cash flow in 2011 and gaps have persisted since then, Winters wrote in a report posted on his Mountain Lakes, New Jersey-based firm’s website yesterday that had a similar chart. The company has taken on debt to cover the outlays, the report said.

“Additional spending on executive bonuses and severance charges threatens to make this problem even worse,” he wrote. Winters estimated the company will pay at least $1 billion in cash bonuses next year under a compensation program, and will also take $1 billion or more in cash charges for job cuts and other restructuring moves.

Coke, based in Atlanta, has raised its dividend each year since 1963. The next payout is due to be declared in February and is poised to increase 8.2 percent, to 33 cents a share quarterly, according to a Bloomberg analysis.

“Putting Coke’s record of annual dividend growth at risk is irresponsible,” wrote Winters, whose firm has 2.5 million shares and has been a stockholder for more than five years. Wintergreen oversees $2 billion in assets.

Winters called for the replacement of CEO Muhtar Kent in a statement accompanying the report. He cited takeovers of Coca-Cola Enterprises Inc.’s North American unit and Glaceau, the maker of Vitaminwater, that cost a total of $16.3 billion and “destroyed shareholder value.”

Winter’s assertions are without merit, Coca-Cola said in a statement.

“The Coca-Cola Co. is well-positioned to capture growth in the dynamic non-alcoholic ready-to-drink beverage industry,” according to the e-mailed statement. “Muhtar Kent and the company’s leadership team have outlined meaningful strategic plans to accelerate sustainable and profitable growth and deliver long-term value to our shareowners.”

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