Coca-Cola has been a reliable dividend stock for decades.
Its scale, diversification, and moat will drive its stock even higher.
Coca-Cola (NYSE: KO) is a classic dividend stock for income investors. The world's largest beverage company has raised its dividend annually for 64 consecutive years, putting it in the elite club of Dividend Kings, which have maintained that streak for at least 50 years.
If you had invested $200 into Coca-Cola's stock each month for the past 10 years, your principal would have grown from $24,000 to nearly $37,800 and paid out over $3,800 in cumulative dividends. You would also have an annualized yield on cost (based on your average purchase price) of 3.5%, compared to its current forward dividend yield of 2.3%.
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Past performance never guarantees future gains, but Coca-Cola's scale, diversification, and wide moat suggest it can deliver similar returns over the next decade. In addition to its flagship sodas, it sells bottled water, fruit juices, teas, energy drinks, sports drinks, coffee, and even alcoholic beverages. It's also refreshing its sodas with smaller serving sizes, new flavors, and healthier options to attract new customers, even as soda consumption declines.
Coca-Cola only sells the concentrates and syrups for its drinks to its bottling partners, which produce and distribute the finished drinks. That asset-light model enables it to generate ample cash for dividends and operate at higher margins than PepsiCo (NASDAQ: PEP), which bottles its own drinks and sells lower-margin packaged foods. Therefore, Coca-Cola should remain a reliable evergreen stock for income-oriented investors for the foreseeable future.
Before you buy stock in Coca-Cola, consider this:
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Leo Sun has positions in Coca-Cola. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.