Conservative play with pop culture.

• Author: Maley, Frank
• Position: Money Matters

If you're looking for the pause that refreshes, glance at this year's numbers for Coca-Cola Bottling Company Consolidated. Analysts estimate that earnings will increase 110%, to $2.25 a share. And that's after rising 51% last year. But look closely at what gives those figures their fizz: This year's increase will come mostly from an accounting change, and all but 4% of last year's was from a big tax settlement.

That doesn't mean this Coke has gone flat. After adjusting for this year's accounting change -- companies no longer have to take charges to amortize goodwill -- and last year's tax settlement, earnings are still expected to grow 50% in 2002. Credit lower interest rates, growth in noncarbonated-beverage sales and new flavors of carbonated drinks. Charlotte-based Coke Consolidated (Nasdaq: COKE) is the nation's second-biggest Coke bottler, with 7.4% of the soft drink's North American volume. And it pays the biggest dividend -- $1 a year since 1994 -- in the soft-drink sector.

But that dividend doesn't come cheap. With 2001 earnings of $1.07 per share, Coke's price-to-earnings ratio of 46 makes it one of the most expensive Tar Heel stocks. With the expected earnings spike, the stock will look cheaper, with a P/E of about 21. But it still won't be a bargain. And the 2% dividend yield means safety-minded investors could do as well or better with a certificate of deposit or Treasury bill.

Coke Consolidated shares were trading at a 52-week high of $50.95 in mid-April. More than 80% of them are controlled by insiders, which curbs trading volume, but analysts still see potential. Jeffrey Kanter at Prudential Securities in New York set a 12-month target at $52 but plans to raise it. Richard Joy, of S&P Equity Group in New York, says Atlantabased Coca-Cola Enterprises, the nation's largest bottler, might buy Coke Consolidated -- which could mean a hefty premium.

Kanter pooh-poohs that notion. Coke Consolidated, still controlled by heirs of its founder, traces its roots to 1902. That's when J. B. Harrison, great-grandfather of Chairman and CEO I. Frank Harrison III, bought the Coca-Cola bottling franchise in Greensboro. The Harrisons own about 22% of the company and control 92% of the voting shares. Plus, J. Frank III is only 47. "Nobody has a chance at buying them until the Harrisons say, 'Yes,' " Kanter notes.

Coke Consolidated should satisfy investors who thirst for a safe dividend and a chance for modest price gains. But it may not do much...