Iconic Brands Boost Shareholder Value with Increased Dividends

Marketing experts emphasize a vital truth: “Branding is everything.” Creating a powerful brand can be challenging, but once established, it offers immense advantages. A strong brand can provide firms with pricing power, even if their products are not superior to competitors’. This reputation can create an emotional connection for consumers, making them feel aligned with something significant. Additionally, other businesses often seek to partner with respected brands. Thus, effective branding is closely linked to long-term business success.

One substantial advantage of sustained business success is the ability to return capital to shareholders. Below, we explore how three prominent brands are doing just that.

Coca-Cola: The Beverage Giant Approaches a 3% Dividend Yield

No company illustrates the strength of branding quite like Coca-Cola (NYSE: KO). Numerous studies, including blind taste tests comparing Coca-Cola and Pepsi (NASDAQ: PEP), reveal an interesting trend.

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According to the University of South Carolina, taste tests often find that participants prefer Pepsi over Coke. Yet Coca-Cola remains the leading soft drink brand in the U.S., boasting nearly twice the market share of Pepsi. Many attribute this dominance to Coke’s strong branding and effective packaging, which can influence perceptions of taste.

In 2024, Coca-Cola reported an adjusted gross margin of 61%, compared to Pepsi’s 55%, suggesting some pricing power advantage. However, this comparison is complicated as Pepsi also produces snacks, while Coca-Cola focuses primarily on beverages.

Recently, Coca-Cola rewarded its shareholders with a 5.2% dividend increase. The upcoming quarterly dividend will be paid on April 1 to shareholders on record as of March 14. This marks the company’s 63rd consecutive year of dividend increases, resulting in an impressive indicated dividend yield of 2.9% as of March 4.

Home Depot: Dividend Growth Continues

Home Depot (NYSE: HD), a leading American home-improvement retailer, is also raising its dividends. While its global recognition may not match that of Coca-Cola, Home Depot’s dominance in the U.S. market is notable.

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With 86% of its stores located in the U.S. and the remaining in Canada and Mexico, Home Depot commands a market capitalization of around $380 billion, which is nearly three times that of its closest U.S. competitor, Lowe’s Companies (NYSE: LOW).

Recently, Home Depot announced a more modest dividend increase of 2.2%, bringing its annual dividend to $9.20 per share. The next quarterly dividend will be payable on March 27 to shareholders recorded by the close of business on March 13. As of March 4, the company also boasts a solid indicated dividend yield of 2.4%.

Ferrari: Revving Up Dividends

Across the ocean, Ferrari (NYSE: RACE) is making headlines with a significant annual dividend increase of 22%, now set at 2.99 euros per share.

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This adjustment will affect shares on both the Euronext Milan (EMX) and the New York Stock Exchange (NYSE). Converting euros to U.S. dollars at an exchange rate of 1.08 USD to euros equates to approximately $3.22 per share. This implies a dividend yield of 0.7% on both exchanges as of March 4.

If approved by shareholders, the annual dividend will be issued on May 6 to those on record as of April 23. Ferrari’s strong roots in Formula 1 racing have significantly contributed to its iconic status, as the brand is synonymous with speed and performance. Notably, the Ferrari F1 team is the only one that has competed in every season of Formula 1 since its inception.

Interestingly, with a market capitalization surpassing $80 billion, Ferrari holds a higher valuation than the Detroit Three U.S. automakers combined.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.