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Best Income Stocks for 2013 – Coca-Cola Enterprises Inc. (CCE)

Coca-Cola Enterprises, Inc. (NYSE: CCE) produces, distributes, and markets nonalcoholic beverages. It provides still and sparkling waters, juices, sports drinks, juice drinks, coffee-based beverages, and teas.   Coca-Cola Enterprises is a great total income play with a 13.0% payoff and a projected increase in EPS of 10% in 2013 and 2014.

Coca-Cola Enterprises made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Coca-Cola Enterprises is projected to have a 11.1% earnings accretion and a 1.9% dividend yield, for a total combined 13.0% payoff.  The Atlanta-based bottler of Coca-Cola is now trading in the mid-$30 range and has an upside of about 19%.

Coca-Cola Enterprises has an equity summary score of 7.6 out of 10 for a Bullish outlook.  First Call Analyst consensus has a HOLD recommendation with a 2.5 rating.

“Our 2012 results will reflect our ability to deliver solid earnings growth by closely managing each aspect of our business and continuing world class marketplace execution in difficult operating conditions,” said John F. Brock, chairman and chief executive officer. “Going forward, we will rely on our global operating framework, our successful brands, increased effectiveness through our business transformation effort, and the skill and dedication of our employees.

Coca-Cola Enterprises expects FY12 EPS at the high end of its previously disclosed range of $2.20 – $2.24, versus the Capital IQ consensus estimate of $2.23.  Net sales and operating income are expected to grow in a low to mid-single-digit range.

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It also anticipates FY13 comparable and currency neutral EPS to grow about 10%. Net sales and operating income are expected to grow in a mid-single-digit range.

CCE intends to increase its 2013 dividend payout to a range of 30% to 35% of 2013 comparable and currency neutral earnings per share.  This would be the sixth straight year of dividend increases and represents an expected annualized 2013 dividend increase of at least 15 percent above 2012.

The company has completed its most recent share repurchase program by reaching the cumulative 65 million maximum number of repurchased shares authorized by the Board of Directors.  During 2012, this resulted in 27 million shares or $780 million in shares repurchased.

Coca-Cola Enterprises Inc.’s board approved a new $1.5 billion stock repurchase program.  The company said it expects to repurchase at least $500 million of stock during 2013.

Coca-Cola Enterprises, which was spun out of Coca-Cola Co. (KO) in 1986, sold its North American operations to Coca-Cola in 2010. Western Europe’s economic woes have posed a threat to demand for its soft drinks. The bottler also has grappled with higher taxes inFrance, aggressive competitive spending in the U.K. and the negative impact of currency translation.

The company reported in October its third-quarter earnings fell 7.4% as revenue slid 3.3%, though volume rose.  The Company will report 4Q earnings on February 7, 2013.

The soft drink industry is mature and highly concentrated. CCE conducts its business primarily under bottle contracts with KO. It has the exclusive right to produce and market CocaCola soft drinks in authorized containers in specified territories; KO has the ability, at its sole discretion, to set prices for concentrates and syrups. CCE’s competitors include the local bottlers of competing products and manufacturers of private label products. It competes with bottlers of products of PepsiCo, Inc. (PEP) and its largest bottler Pepsi Americas (PAS), Nestle S.A. (NSRGY), Groupe Danone, Kraft Foods Inc. (KFT), and private label products, including those of some of its customers. In some territories, CCE sells products it competes against in other territories.

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