4 Reasons to Buy Coca-Cola Stock Like There's No Tomorrow

If you're a stock investor looking at the long term, you know there's no use in timing the market. After all, it's a futile exercise, since it's virtually impossible to predict what short-term factors may affect stock prices.

But that doesn't mean that compelling long-term opportunities don't present themselves. Blue chip company Coca-Cola (NYSE: KO) is one such stock.

It may surprise some investors that this venerable company still offers an attractive opportunity for those looking to hold the stock for a long period. It's time to learn more about Coca-Cola and lay out the reasons that patient investors should purchase the shares.

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1. Growing dividends

Coca-Cola should appeal to those seeking dividend-paying stocks. The stock does not just have a long history of payments, but an impressive record of regular increases.

Earlier this year, the board of directors raised the quarterly payout by more than 5% to $0.51. The latest increase marked 63 consecutive years that shareholders have seen a higher payment. That makes Coca-Cola a Dividend King.

Clearly, the company prioritizes dividends in its capital allocation. With a payout ratio of about 67%, Coca-Cola can afford the payments, too.

The stock has a much higher dividend yield than the overall market, as measured by the S&P 500 index. Coca-Cola's stock yields 2.9%, versus 1.2% for the S&P 500.

2. Steady revenue growth

Coca-Cola first started selling drinks in 1886, and now sells beverages in more than 200 countries. These include soda, water, plant-based beverages, juice, and value-added dairy.

The company's days of rapid expansion and fast revenue growth seem likely to be behind it. But Coca-Cola has produced steady top-line growth.

Third-quarter revenue, adjusted to remove foreign-currency translations and acquisitions/divestitures, grew 6% compared to a year ago. The increase came solely from higher prices/changing mix. Meanwhile, volume was flat.

Ideally, some of the company's revenue growth should come from higher volume. However, I'm not concerned, since it's a challenging period for consumers dealing with economic uncertainties and higher prices.

At some point, inflation will abate, and I expect volume will pick up. In the meantime, Coca-Cola's beverages continue to gain market share.

3. Profit growth

Coca-Cola's not merely growing its share of the market at the expense of its margin and profitability. That's obviously important, since a company's profit ultimately correlates with stock price performance.

On an adjusted basis, Coca-Cola's operating margin expanded 1.2 percentage points to 31.9%. This came about despite an increase in marketing spending.

With higher sales and an expanded margin, the company had an impressive 15% increase in operating income.

4. Total return potential

Coca-Cola's stock price has gained 14.3% this year through Nov. 14. That's essentially in line with the S&P 500's 14.5% appreciation.

However, Coca-Cola's shares now trade at a more attractive valuation, based on the price-to-earnings (P/E) ratio. The stock has a P/E multiple of 24, compared to 25 at the start of the year, and it reached 28 earlier this year. The current P/E ratio is also lower than the 10-year median of 28.

Coca-Cola's stock also has a better relative valuation than the S&P 500. The index has a P/E ratio of 30.

A higher relative dividend yield combined with an attractive valuation makes a powerful combination. It means investors can sit back and confidently collect dividends, while patiently waiting for the stock price to increase over time due to profit growth and multiple expansion.

That creates a compelling total return opportunity.

Lawrence Rothman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.