With $10,000 invested in Coca-Cola today, you get around 112 shares, generating $237.44 in annual dividend income.
Assuming this Dividend King keeps steadily raising its payout by around 3% annually for the next decade, this same position could yield you $319.20 in annual dividend income.
With dividends reinvested, the impact could be even more significant, as $10,000 invested 10 years ago in Coca-Cola, with dividends reinvested, has snowballed into a position worth nearly $29,000.
From everyday investors to Warren Buffett's holding company, Berkshire Hathaway, many have made Coca-Cola (NYSE: KO) a core portfolio position, largely due to its long track record of dividend growth.
Coca-Cola is one of the Dividend Kings, or stocks with at least 50 years of consecutive annual dividend increases. Expecting this trend to continue, how much could a $10,000 position in Coca-Cola, entered today, yield you in 2036?
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Recently trading for around $89.35 per share, a $10,000 investment in Coca-Cola amounts to around 112 shares. In February, the company's board implemented its 64th consecutive annual dividend increase, hiking the payout by around 4% from $0.51 to $0.53 per share.
That's around $2.12 per share annually. Multiply that by 112 shares, and you get $237.44 for the annual dividend income generated from the position. This equates to a forward dividend yield of around 2.37%.
Recently, Coca-Cola has reported very strong earnings growth, including adjusted earnings per share (EPS) growth of around 11%, but it's unclear whether this earnings resurgence persists.
Still, even if growth reverts to mid-single-digit norms, the company will remain well-positioned to implement 2% to 4% annual dividend increases. Splitting it down the middle, and assuming that Coca-Cola will increase its dividend 3% annually, that could mean that this blue chip stock's annual payouts are around 34.4% above present levels.
In other words, annual dividends totaling around $2.85 per share. Multiplied by 112 shares, and the aforementioned $10,000 position generating $237.44 could be generating $319.20 in annual dividend income. With dividends reinvested, the impact is much more significant. Over the past decade, Coca-Cola shares have generated total returns, or price appreciation plus dividend payouts, totaling 187.6%.
If shares deliver similar total returns in the decade ahead, today's $10,000 position could be worth nearly $29,000, generating hundreds in annual dividend income to boot.
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Thomas Niel 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.