Coca-Cola's Q1 was only okay, but company is still a refreshing core holding

And here's something I didn't like: Coke paid out $950 million in dividends in Q1. That's more than the cash flow! There is something to keep in mind on this point, though. Coke normally pays its first dividend of the year on April 1. This year was no different. The first quarter of the current fiscal year, however, ended on April 3. Last year, the quarter ended before April 1, so no dividend payments were recorded. Same thing happened in Q1 2007.

So, the cash flow will catch up; plus, this is only the first quarter of the year. Coke generally does well with cash flow and dividends on a twelve-month basis. Nevertheless, it would have been nice to see Q1 cash flow cover the first dividend of 2009. Won't always happen, though.

Coke increased its case-volume metric by 2%. Not exactly the most robust number ever, but okay, the economy is tough, I'll maybe let that slide.

However, here's something that Coke still needs to address: weakness in North America. Case volume slipped 2% in that territory. Come on, Coke, get your act together! The company needs to pump up the domestic volume. I'm not sure what the answer is. I've called on Coke to implement better marketing strategies in the past, but maybe this problem needs something a little more than novel advertising concepts. Maybe Coke should take a more intensive look at its portfolio and at trends in consumer behavior to better position the North American marketplace. Who knows at this point?

One thing I was glad to hear was that CEO Muhtar Kent, according to Reuters, did not seem interested in acquiring Coca-Cola Enterprises (NYSE: CCE). Personally, I agree with him that the franchise system is superior to owning the bottlers outright. Bottlers are more capital intensive, and it would be better for KO shareholders to remain separate from them. What sparked this discussion? Well, I'm sure you heard about PepsiCo's bid for its two major bottlers. I don't think Coke really wants to go that route.

Well, let's be honest. This won't go down as Coke's best quarter ever. That's all right. I don't think the company's long-term story has changed. I myself own shares in a long-term portfolio, and I'm happy to see Coke holding up relatively decently during the recession.

The board increased the dividend earlier this year, and although I don't think Coke is a great trade at the moment, I think you can be confident if you decide to do some dollar-cost-averaging into an existing position (I myself hope to add to my KO position in the coming weeks). One thing I do hope is that the company reinstitutes its share-repurchase activities. This item mentions how Coke suspended buybacks because of a pending acquisition, one that is no longer on the table. I think a new round of buybacks is in order.

Disclosure: I own Coke; positions can change without notice.