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A cheap FTSE 100 dividend stock I plan to own forever!

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Coca-Cola HBC (LSE: CCH) is one of my favourite FTSE 100 shares that I currently own.

Coke is one of the best-loved consumer brands on the planet, making the drinks bottler one of the most dependable earnings (and thus dividend) growers out there. It is also a direct beneficiary of Coca-Cola’s great track record of product innovation. Its success in the fields of energy and no-sugar drinks are perfect examples of its ability to catch consumer trends.

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City brokers think the company’s earnings will rise 27% year-on-year in 2021 as bars and restaurants reopen and the ‘on the move’ channel recovers. They predict an extra 12% annual increase in 2022. Like all forecasts, this could change based on future developments and is not something to rely on.

These bright estimates make Coca-Cola HBC look extremely cheap on paper. This year the FTSE 100 firm trades on a price-to-earnings growth (PEG) ratio of just 0.8. A reminder that any reading below 1 suggests that a stock could be undervalued by the investment community.

Trouble on the horizon

Coca-Cola HBC isn’t without risk, of course, and it could experience some significant profits headwinds in the short-to-medium term. Last week its counterpart Coca-Cola Europacific Partners — which operates in European territories not served by the FTSE 100 company — warned that supply chain problems were causing can shortages and a lack of drivers to move its product. These are problems that threaten to disrupt the entire soft drinks sector.

A line of Coca-Cola cans at a bottling plant

A rock-solid FTSE 100 dividend share

Current predictions of solid earnings growth mean that the business is expected to remain a dependable and generous dividend grower. Analysts think Coca-Cola HBC will lift the annual payout to 68 euro cents a share in 2021, and again to 73 cents next year. The FTSE 100 business paid a 64 euro cents dividend last year, even though earnings dropped 15% year-on-year.

These dividend forecasts also look pretty solid in my book, with predicted payments covered 2.1-2.2 times by anticipated earnings over the next two years. A figure of two times or above is generally considered to represent decent security to investors. And of course Coca-Cola HBC has a strong balance sheet to fall back on if required.

In my opinion, Coca-Cola HBC is one of the best FTSE 100 stocks I can buy for a no-drama investment. Coke’s supreme brand power gives it excellent earnings visibility and therefore the confidence to raise dividends even when annual earnings slip (as was the case in 2020). And what’s more, its current valuation leaves plenty of room for error in case supply problems hit near-term earnings. This is a UK share I plan to hold forever.

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Royston Wild owns shares of Coca-Cola HBC. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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