Wall Street Is Buzzing About Alphabet Joining the Dow. Income Investors Should Be Looking at This Stock Instead.

Google parent Alphabet is officially a member of the Dow Jones Industrial Average. Inclusion of this stock in the oldest U.S. equity index comes at the expense of Verizon Communications and continues the "tech-ification" of the Dow.

An index that was once heavy on old economy stocks now allocates about 21% of its weight to the "growthier" technology and communication services sectors. And because the Dow weights holdings by share price, Alphabet is now the gauge's sixth-largest component, a prominent perch for a new addition.

Alphabet joins the group of Dow dividend payers, which includes all of the index's members except Amazon. And to the Google owner's credit, it has boosted its payout twice since launching it in 2024. However, investors seeking reliable equity income among Dow members should remember a familiar name: Coca-Cola (NYSE: KO).

Alphabet is the new "cool kid" in the Dow, but don't forget about Coca-Cola. Image source: Getty Images.

Small Dow stock, big dividend dependability

Coca-Cola commands just 0.9% of the Dow's weight. Only Nike is a smaller member of the index. That fact doesn't obscure the beverage maker's status as a blue chip dividend stock.

Shares of Coca-Cola have resided in the Dow since 1987, making the stock one of the longest-running members of the index. Speaking of streaks, the dividend increase it announced in February marked the 64th consecutive year the payout was raised. That's good for one of the best such streaks among all U.S. companies, Dow members or otherwise.

Importantly, Coke's dividend yield of 2.52% doesn't put off yield trap vibes, though it is more than double the yield on the S&P 500 and about 100 basis points above the Dow's dividend yield. From another angle, this beverage stock threads the needle between dividend yield and payout growth.

Obviously, Coca-Cola's payout increase streak isn't up for debate. Likewise, the yield is favorable by comparison, but not so high as to imply the stock is a yield trap that could eventually subject investors to negative dividend action. For some companies, that's a delicate balancing act, but Coca-Cola achieves it with aplomb.

Worth the price of admission

There's no denying Coca-Cola is the purveyor of one of the world's most recognizable brands. However, enthusiasm for new-economy growth, coupled with Coke's price-to-earnings ratio of 24.7, which implies a "priced for perfection" scenario, may give some market participants pause.

Valuation concerns are valid, but Coca-Cola offers investors utility. The stock can be used to diversify portfolios that are currently leaning too heavily into tech while providing some defense in the event the economy weakens.

Plus, the aforementioned dividend growth is fortified by an impressive cash position. Coca-Cola generated $1.8 billion in free cash flow in the first quarter and has $13.8 billion in cash on hand. That's a quality balance sheet that can provide some protection in rough market settings while supporting long-term dividend increases.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nike. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.