CCEP’s Steady Growth and Solid Dividends: A Strategic Income Play for 2025

Investors seeking reliable income streams in an uncertain market climate may find Coca-Cola Europacific Partners (CCEP) an intriguing opportunity. The company’s recent reaffirmation of mid-term financial targets—4% revenue growth, 7% operating profit, and a steadfast 50% dividend payout—underscores its commitment to balancing growth and shareholder returns. Pair this with its strategic focus on operational resilience, and CCEP emerges as a compelling income play for 2025.

The Dividend Engine: Reliability Amid Volatility

CCEP’s dividend policy has long been a cornerstone of its investor appeal. With a payout ratio consistently anchored at 50%, the company delivered a 7.1% dividend increase in 2024, lifting the annual payout to €1.97 per share. This track record of growth, even as it navigates macroeconomic headwinds, positions it as a stable income generator.

The 50% payout ratio leaves ample room to weather cost pressures while maintaining dividend growth. Furthermore, CCEP’s free cash flow guidance of a minimum €1.7 billion annually provides a robust cushion to fund payouts, with 2024’s performance already exceeding this target. For income-focused investors, this combination of visibility and discipline makes the dividend a low-risk, high-reward proposition.

Operational Resilience: The Drivers of Consistency

CCEP’s ability to sustain its financial targets hinges on three key levers: technology-driven efficiency, disciplined capital allocation, and prudent debt management.

1. Technology-Driven Productivity: Automation and digital tools are streamlining operations, from supply chain logistics to production. This not only lowers costs but also enhances flexibility in a world where disruptions—from inflation to geopolitical shifts—are routine.

2. Capital Allocation Precision: With Capex projected at 4-5% of revenue, CCEP is prioritizing investments in high-return areas like infrastructure and market expansion. This restrained approach avoids overextending the balance sheet, ensuring capital remains available for dividends and strategic moves.

3. Debt Discipline: A net debt to EBITDA ratio of 2.5-3.0x reflects a conservative financial stance. This low leverage ratio reduces refinancing risks and shields the company from interest rate volatility, a critical advantage as central banks remain cautious.

Navigating Risks: A Proven Track Record

No investment is without risk. CCEP faces challenges such as rising commodity costs, inflationary pressures, and geopolitical instability. However, its track record demonstrates resilience:

• Margin Resilience: Despite a 12% revenue surge in 2024 (FX-neutral), operating profit grew by the same margin, highlighting pricing power and cost control.
• Geographic Diversification: Serving 600 million consumers across 31 countries, including key markets like Germany, France, and Australia, reduces reliance on any single region.
• Cash Flow Visibility: The €1.7 billion free cash flow floor provides a safety net, ensuring dividends remain secure even in moderate downturns.

Why Invest Now?

CCEP’s reaffirmed targets and strategic initiatives align perfectly with income investors’ priorities: predictable cash flows, dividend growth, and defensive positioning. At current share prices (~6,610 pence in London trading), the stock offers a dividend yield of approximately 2.96%—competitive in a low-yield environment—and the potential for capital appreciation if growth targets are exceeded.

The company’s May 2025 Capital Markets Event in Manila emphasized its long-term vision, with leadership reiterating confidence in its ability to navigate macro challenges. With a robust balance sheet, disciplined capital strategy, and a dividend policy that prioritizes sustainability over short-term gains, CCEP is positioned to deliver steady returns for years to come.

Conclusion: A Defensive Income Play for 2025

In an era of economic uncertainty, CCEP’s reaffirmed targets and proven resilience make it a standout income investment. Its focus on operational efficiency, controlled leverage, and reliable dividends creates a moat against volatility. For portfolios seeking stability and growth, now is an opportune moment to consider CCEP as a core holding. With its fundamentals intact and a dividend yield that rewards patience, this beverage giant could be the cornerstone of a resilient income strategy.