Meet the Dividend Stock That Warren Buffett Backed for Decades. Here's Why Greg Abel Is Still Holding.
Key Points
Coca-Cola is one of Berkshire Hathaway's longest-standing investments.
The position has multiplied in value and pays back two-thirds of its initial cost each year in dividends.
With no reason to doubt it, Coca-Cola can continue to grow for years to come, making it a no-brainer for long-term dividend investors.
- 10 stocks we like better than Coca-Cola ›
Berkshire Hathaway's famous stock portfolio has seen some changes since new CEO Greg Abel took command at the start of this year. It's only natural for a new captain to put their own spin on things. However, some things work so well that it's better to just leave them alone.
That's probably a good way to sum up The Coca-Cola Company (NYSE: KO), one of Warren Buffett's favorite stocks, and one of the longest-standing investments in Berkshire's portfolio today.
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Do you like dividends? The global beverage giant offers a simple business model and decades of steady growth that align with Buffett's famous investing style, making it a great potential fit for your portfolio.
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An $848 million annual cash machine
Buffett bought Coca-Cola stock for Berkshire Hathaway decades ago, following the infamous 1987 stock market crash. Berkshire had accumulated approximately 400 million shares for $1.3 billion by 1994. Those shares are worth nearly $36 billion today.
Arguably, even more remarkable here is that those shares pay back roughly two-thirds of Buffett's initial investment each year through dividends. Coca-Cola currently pays $2.12 per share in dividends over four quarters, putting Berkshire's annual dividend income at $848 million.
Image source: The Motley Fool.
That's money that Berkshire Hathaway can redeploy across its business in many ways to create value for shareholders.
It can still do the same for your portfolio
No, you aren't going to rake in nearly a billion dollars in Coca-Cola dividends, but the same concepts still apply.
Coca-Cola's business is timeless: People will always drink beverages, and its brands are renowned worldwide. Coca-Cola is everywhere. Yet the company still has only 14% of the market in developed countries and just 6% in emerging countries.
It creates a uniquely long growth runway for a company when the entire global population is a potential customer. Coca-Cola can also generate revenue in several ways, including price increases, organic volume growth, new products, and acquisitions.
That's the secret behind Coca-Cola's ability to grow steadily, seemingly year in and year out, raising its dividend along the way. Coca-Cola is a Dividend King with 64 consecutive annual dividend increases. That's something a company can't accomplish without the ability to endure economic cycles and other challenges over the years.
Coca-Cola's dividend is still only 64% of the company's 2026 earnings estimates, so there's plenty of cushion to sustain and continue raising that payout. That's not including future growth; analysts estimate that Coca-Cola will grow its earnings by 8% to 9% annually over the next three to five years.
Therefore, investors can confidently buy Coca-Cola stock and begin building their own dividend cash machine.
Should you buy stock in Coca-Cola right now?
Before you buy stock in Coca-Cola, consider this:
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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