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This FTSE 100 stock’s dropped 50%! I’d buy it with my new ISA allowance

It’s been a surprise to see shares in Coca-Cola HBC (LSE: CCH) sink in value during the past couple of months. The FTSE 100 soft drinks giant has halved in value since coronavirus panic ramped up during late February.

I reckon this recent weakness provides a terrific buying opportunity. At current prices around £19.30 per share, Coca-Cola trades on a forward P/E ratio of 17.1 times. This is not cheap on paper, but it’s a bargain compared to the company’s historic averages in the mid-20s.

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The Footsie beverages giant isn’t immune to the coronavirus crisis. It has predicted that trading in countries with ‘heavy’ restrictions in place in Central and Southern Europe will suffer considerably. Quarantine measures mean that demand from its out-of-home channel — a segment that accounts for between 35% and 40% of group revenues — will be “severely affected,” it says.

Coca-Cola added that “given the uncertainty of the duration and economic impact of this global pandemic, we no longer believe that it is prudent to provide guidance for the current financial year.”

Dividends maintained

Pleasingly for its investors however, Coca-Cola has resisted the temptation to cut the dividend. By comparison, around a third of FTSE 100 shares have axed or suspended payouts in response to the Covid-19 crisis.

It said it plans to follow through on its intention to pay an ordinary dividend of 62 euro cents per share in June. It certainly has the financial headroom to make good on this promise. Its net debt-to-EBITDA ratio stood at a modest 1.54 times as of December. On top of this, Coca-Cola says that “none of our debt facilities are subject to any financial covenants that would impact the Group’s liquidity or access to capital.”

And the drinks play is taking steps to offset the pressure of falling sales on its balance sheet. It’s reflecting on fresh cost-saving measures to help support profits in these tough times. It would reassess its plans on marketing spend and capital expenditure, it added.

A FTSE 100 stock I’d buy today

The impact of the coronavirus outbreak on our everyday lives in the near term and beyond remains impossible to predict with any certainty. It’s why Coca-Cola pulled its full-year guidance last month. But as things stand, the business looks in good shape to meet current dividend projections for 2020 and yield an inflation-beating 2.6%.

Anticipated dividends are covered a very healthy 2.1 times by forecast earnings. And Coca-Cola’s products have the sort of stunning brand power that should stop annual profits falling off a cliff. Sales from supermarkets is likely to have remained robust during the outbreak. And group revenues should remain solid even in the event of a painful global recession given the exceptional customer loyalty its drinks command. I’d happily add this FTSE 100 stock to my own Stocks and Shares ISA.

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Royston Wild has no position in any of the shares mentioned. 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.