Coca-Cola Earnings Show Why This Dividend Stock, With Its 2.7% Dividend Yield, Remains a Buy

Shares of beverage giant Coca-Cola (NYSE: KO) jumped sharply on Tuesday morning after the company reported its first-quarter 2026 results before the market opened. The Atlanta-based company topped Wall Street's expectations on both revenue and earnings -- and management lifted its full-year earnings forecast as well.

For dividend investors, the report reinforces a thesis that has remained true for decades: Coca-Cola is a slow but steady compounder, and its robust dividend yield is well supported by strong free cash flow that should keep growing.

But with shares now trading near record highs, is the stock still a buy?

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A strong start under a new CEO

The first quarter notably marked the first earnings release with Henrique Braun as Coca-Cola's CEO, after he took the reins from James Quincey on March 31. And it was a solid debut.

Coca-Cola's first-quarter net revenue climbed 12% year over year to $12.5 billion, with organic revenue (non-GAAP), which strips out currency and the impact of acquisitions and divestitures, rising 10%.

This top-line momentum was fueled by an 8% jump in concentrate sales and 2% growth in price and/or product mix. Further, Coca-Cola saw strong volume growth, too. Unit case volume grew 3%, with growth across all five of the company's operating segments, including particularly strong performance in China, the United States, and India.

Further, the company's profitability improved. Coca-Cola's comparable operating margin expanded to 34.5% from 33.8% a year earlier, helping push comparable earnings per share up 18% year over year to $0.86.

Coca-Cola also reaffirmed its full-year organic revenue growth target of 4% to 5% but raised its comparable earnings-per-share growth outlook to a range of 8% to 9% -- up from 7% to 8% previously. And for the full year, management reiterated its guidance for total free cash flow of about $12.2 billion.

Why the dividend remains the story

Coca-Cola's stock's appeal arguably isn't its rate of appreciation over the years (its shares meaningfully underperformed the S&P 500 over the last five years). It's the cash the company sends back to shareholders -- and the consistency with which it does it.

In February, the board raised the quarterly dividend to $0.53 per share from $0.51 -- approximately a 4% increase. Showing how incredible the company's dividend track record is, its latest dividend hike extended Coca-Cola's streak of consecutive annual dividend increases to 64 years -- a feat only a small slice of public companies on the planet can claim.

Even more, Coca-Cola's dividend yield is meaningful. At an annualized rate of $2.12 per share, the dividend yield currently equates to about 2.7%. For context, the current dividend yield of the S&P 500 is just 1.1%.

Further, the dividend looks resilient, with a well-covered payout. Coca-Cola paid $8.8 billion in dividends in 2025 against full-year free cash flow of about $11.4 billion when adjusted to exclude a one-time contingent consideration payment for its Fairlife acquisition. And with management guiding for free cash flow of approximately $12.2 billion in 2026, the cushion could widen even further this year.

Of course, the stock isn't without risk. The company always faces the persistent risk that younger generations will drink less soda. In addition, shares aren't necessarily cheap, so there's some valuation risk. Finally, given the company's global distribution, geopolitical conflicts can disrupt its business.

But for investors who value a steadily rising, resilient dividend with a track record of more than six decades, Coca-Cola is a good investment. Put another way: I think Coca-Cola remains a top stock for investors looking for steady income. Sure, trading at about 26 times earnings, the stock isn't cheap. But a company of Coca-Cola's caliber arguably deserves a premium valuation like this.

Daniel Sparks and his clients have 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.