04-09-2014, 02:24 PM
I'm not really sure what to make of this. Of course it sounds bad, but maybe Winters is just trying to get some press for his group. It is hard to judge whether this is standard operating procedure for big companies or if this is really something unusual that ought to raise our ire. That said, diluting shareholders by .7% per year would seem to constitute quite a drag on performance.
Tim McAleenan has a nice article about this up here. His conclusion seems sound to me:
For me, 10 to 11% growth out of KO would be a big (and pleasant) surprise. I'd bet on closer to 6, which would make the effects of this dilution greater. I'm not ready to sell over this, but will certainly try to read more about it, and I'll certainly be glad if there is enough of a kerfuffle in the media and among shareholders over this that the issue gets the thorough vetting that it deserves.
Tim McAleenan has a nice article about this up here. His conclusion seems sound to me:
Quote:Considering that Coca-Cola dilutes shareholders to the tune of 0.7% per year, does the brand quality and growth potential, adjusted for the dividends and buybacks, make this still a good investment? If you think Coca-Cola is still going to grow 10% or 11% per year, then selling the stock out of protest for management compensation is only going to harm yourself. On the other hand, if you think the business is only going to grow 6% per year because of concerns about the company growing its soda business (in North America in particular), then I could understood why 0.7% dilution would be the tipping point that leads you to sell.
For me, 10 to 11% growth out of KO would be a big (and pleasant) surprise. I'd bet on closer to 6, which would make the effects of this dilution greater. I'm not ready to sell over this, but will certainly try to read more about it, and I'll certainly be glad if there is enough of a kerfuffle in the media and among shareholders over this that the issue gets the thorough vetting that it deserves.