Coca-Cola Europacific Partners plc (NYSE: CCEP) is one of a six-pack of ways to invest in classic beverage maker Coke — and a darn good one at that. 

Over the last 12 months, the world’s largest Coca-Cola bottler is up 32%, a reflection of improving economic conditions in the Western European and Asia-Pacific markets it serves. That’s roughly four times greater than the 1-year return on Dow-30 component (and Warren Buffett holding) Coca-Cola (KO). 

The outperformance is far from a temporary phenomenon. With a 10-year annualized total return of 11.8%, CCEP has significantly outpaced KO (8.1%) in the long run too. 

Yet with CCEP having a market cap that’s one-tenth that of KO, the stock gets relatively little attention. The same goes for the other four Coca-Cola stocks and ADRs despite each having similar growth drivers. 

A steady riser throughout most of its 15-year trading history, CCEP is on pace to finish up for the seventh time in the last eight months. Last month, it eclipsed its June 2021 all-time high of $63.04. Following a positive first-quarter update, it has only gone higher. 

Ahhh, yes...this Coca-Cola investment ‘case’ continues to look refreshing. 

What Were the Highlights of CCEP’s Q1 Report?

On April 25th, CCEP flashed Q1 financial metrics that were solid across the board. Revenue was up 12% year-over-year, with roughly equal growth in both Europe and Asia-Pacific. Sales volumes were particularly strong in Europe (versus flat in Asia-Pacific), which is an encouraging sign for two reasons: 1) European customers account for approximately three-fourths of total sales, and 2) it shows that growth in the key region is being driven by more than just price hikes. 

Overall, the performance reflected continued growth in CCEP’s home channel and the ongoing recovery of ‘away-from-home distribution as restaurants, theme parks and sporting events resume across Europe. Sports beverages and energy drinks performed especially well during the quarter, with 15% growth in both categories led by Powerade and Monster, respectively. The rollout of new flavors helped the Fanta brand perform well too.

A good start to the year led management to reaffirm its 2023 guidance, which calls for 6% to 8% top-line growth. It's an outlook that may be overly conservative, and not just because the company just turned in 12% growth in a seasonally weak period. With summer concerts, picnics and the winter holidays still to come, double-digit full-year growth isn’t far-fetched.

Does CCEP Pay a Dividend?

Absolutely. CCEP actually offers the biggest dividend of the six publicly traded Coca-Cola stocks. Its 3.7% trailing yield is well above KO’s 2.9% yield and those of the rest of the pack. 

Last month, the board approved a $0.74 per share interim dividend, which amounted to 40% of the 2022 dividend. This suggests that the second-half dividend payment will increase as CCEP will want to maintain, if not raise, its full-year dividend in 2023. Lowering the dividend runs the risk of alienating shareholders, especially at a time when the business is accelerating. 

Management’s targeted dividend payout ratio of 50% of profits is another positive. Significantly below KO’s 65% payout ratio, it creates a nice balance of returning wealth to shareholders and reinvesting in growth opportunities.

Is it Too Late to Invest in CCEP Shares?

It's too late to capture CCEP’s interim dividend, which goes out to shareholders on May 25th. But it's not too late to snag the second-half dividend, which will likely be paid in November 2023. 

Beyond the income benefit, CCEP’s prospects for continued growth in Europe and Asia-Pacific are the main reason to invest. The bottler serves over 600 million consumers with Great Britain, Germany, France and Australia among its biggest markets. Both regions are growing, and both ‘at home’ and ‘away from home’ consumption trends are positive. At this stage, investors would be hard-pressed to find a weak spot.

Even the valuation is attractive. CCEP is trading at 17x this year’s earnings per share (EPS) estimate compared to KO at 24x. And while KO’s revenue is now well beyond pre-pandemic levels, CCEP is still generating sub-2019 revenues. As a convenience store, restaurant and hotel traffic normalize, CCEP’s revenue should surpass 2019 levels within a year or two. 

While CCEP isn’t widely followed by American investors, it does have an active following of a dozen sell-side research firms. Even with the stock at new highs, two out of three analysts call it a buy. Far from a volatile name, it probably won’t show up on ‘daily top gainers’ lists — but it will likely keep producing reliable returns.