To build a company that stands out, marketing experts all say one thing: "Branding is everything." Although creating an iconic brand is easier said than done, once achieved, it can have remarkable benefits for a business.
Firms can have pricing power because of their brand's prestige, even if their product isn't better than the competition. This is true because brands can make people feel associated with something important. Other businesses also often want to align themselves with companies that consumers respect. In many cases, creating a successful brand goes hand in hand with creating a long-standing successful business.
A benefit of long-term business success is that companies have more ability to return capital to their shareholders. Below is a look at three iconic brands doing just that.
Coca-Cola: Beverage King’s Dividend Yield Approaching the 3% Mark
Perhaps no company in the world exemplifies the power of branding better than Coca-Cola (NYSE: KO). Many studies over the years have had people blind taste-test Coca-Cola and Pepsi (NASDAQ: PEP).
According to the University of South Carolina, participants tend to prefer the taste of Pepsi over Coke in these tests. However, Coke remains the dominant soda brand in the United States, with approximately twice the market share of Pepsi. Many say this is because of Coke’s strong branding. They believe that the packaging makes people think Coke tastes better.
In 2024, Coke had an adjusted gross margin of 61%, while Pepsi’s was 55%. This suggests that Coke may have some pricing power over Pepsi. However, it is a little difficult to say for sure based on this metric. Pepsi also sells snacks, while Coke almost exclusively deals in beverages, introducing some complications in this assessment.
Now, Coke is rewarding shareholders with a 5.2% dividend increase. The next quarterly dividend is payable on Apr. 1 to shareholders of record as of Mar. 14. This is the firm’s 63rd consecutive annual dividend increase. Based on its Mar. 4 closing price, the company has a strong indicated dividend yield of 2.9%.
Home Depot: Dividend Payments Are Getting an Improvement
The iconic American home-improvement store Home Depot (NYSE: HD) is also raising dividends. Although Home Depot’s brand isn’t as globally recognized as Coke, the dominance of this brand in the United States is undeniable.
The company operates mostly in the United States, with 86% of its stores located in the 50 states or U.S. territories. The rest of its stores are in Canada and Mexico.
Home Depot’s U.S. dominance is highlighted by its market capitalization of around $380 billion, nearly three times larger than its nearest U.S. competitor, Lowe's Companies (NYSE: LOW).
Home Depot recently announced a significantly smaller dividend increase, but it is still worth talking about compared to Coke. Its dividend will rise by 2.2%, and it will now pay out an annual dividend of $9.20 per share.
The next quarterly dividend will be payable on Mar. 27 to shareholders of record at the close of business on Mar. 13. The company also has a strong indicated dividend yield of 2.4% as of the Mar. 4 close.
Ferrari: Addressing the Need for Speed and Higher Dividends
Going overseas, one of the world’s most iconic carmakers, Ferrari (NYSE: RACE), just announced a huge dividend increase. The company will increase its annual dividend by 22% to 2.99 euros per share.
This will apply to its shares traded on both the Euronext Milan (EMX) and the New York Stock Exchange (NYSE). Using a euro to U.S. dollar exchange rate of 1.08 USD to euros, this equates to $3.22 per share. Based on this, its dividend yield would be 0.7% on both the NYSE and EMX as of the Mar. 4 close.
If approved by shareholders, the single annual dividend will be payable on May 6 to shareholders of record on Apr. 23.
Ferrari's strong connection to Formula 1 racing helped shape its iconic brand. Its cars are famous for their combination of speed and maneuverability.
The Ferrari F1 racing team is the only one to have competed in every F1 season since the world championship began.
It may come as a surprise to some that, with a market capitalization of over $80 billion, the company is significantly more valuable than any of the Detroit Three U.S. carmaker stocks.