Coca-Cola Joins Costco in the $400 Billion Club. I Predict Only 1 of These Dividend Stocks Will Surpass $1 Trillion by 2036.

The Coca-Cola Company (NYSE: KO) has officially caught up with club retailer Costco Wholesale (NASDAQ: COST)... almost. Thanks to KO stock's year-to-date 34% rally to record highs, the beverage behemoth's market cap has just eclipsed the $400 billion mark, moving within sight of Costco's $440 billion. That's impressive. Coca-Cola is simply extending a long-lived growth trend that puts it on track to eventually join the $1 trillion club.

Only one of these dividend payers has a realistic shot at getting there within the next 10 years, however. Here's why.

Good, but not built for growth

This isn't to cast any shade on Coca-Cola. It's a fine company with a portfolio of perpetually marketable products like Minute Maid juices, Gold Peak tea, and Powerade sports drinks, in addition to its namesake cola. Its stock is also an income juggernaut, not only paying a quarterly dividend like clockwork for decades now, but raising its dividend payment for 64 consecutive years. Even with this ticker's recent gains, newcomers will be plugging into a respectable forward-looking yield of 2.3%.

However, Coca-Cola is already the leader of a highly saturated drinks market that grows -- at best -- in the mid-single digits. Its opportunity for net growth is limited. For its market cap to reach $1 trillion by 2035, its stock would need to gain 250%. That's an annualized growth rate of nearly 10%, which is possible, but a stretch.

Shareholders reinvesting the beverage company's dividends might achieve such a gain. Given the stock's current elevated price and the fact that roughly half of its profits are consumed by dividend payments, however, the stock itself is unlikely to achieve that sort of gain.

That's not the case for Costco.

A bigger, better growth runway

Yes, the brick-and-mortar retailing industry is saturated too. The industry's growth is in the single digits as well. That doesn't mean its growth opportunities are limited, though. The opportunity rests in the ongoing evolution of how people shop.

Cost-effective shopping -- like that offered by Costco's membership-based offering -- is increasingly popular. In addition to last fiscal year's (ending in August) total revenue growth of just over 10%, Costco's same-store sales improved by an industry-beating 6.6%, extending a well-established streak.

However, Costco's growth potential is rooted in what it hasn't done yet.

The much bigger Walmart's (NASDAQ: WMT) 602 Sam's Club warehouses compete directly with Costco. At the same time, the company's leveraging its several thousand stores to serve its paying Walmart+ members. This reach is nothing to dismiss. Surprisingly, though, Costco remains unfazed. The original powerhouse in this space now boasts a record-breaking 84.1 million paid club memberships, extending a growth trend that's essentially been uninterrupted since the club retailer's launch. Membership renewal rates that are consistently around 90% help on this front.

Image source: Getty Images.

This still only scratches the surface of what awaits. As of August, Costco operates only 647 domestic stores, plus another 292 outside the United States. There's room for more. There are immediate plans for more as well; the company expects to open 28 more locations this fiscal year alone. For comparison, Walmart -- arguably Costco's top threat -- operates around 11,000 stores worldwide.

Although Walmart's massive established presence could be interpreted as a barrier to Costco's expansion, it's also an indication of what consumers are willing to support in terms of a total physical retailing footprint. Indeed, the presence of a Walmart store in a particular market may indicate that the area is already primed for a cost-effective alternative. Whereas Walmart obviously won't want to cannibalize its own stores, Costco's smaller store count means it's got plenty of places to build new locales without competing with itself.

Again, we continue to see a growing consumer preference for smarter shopping.

Do-able

Costco still has plenty of growth to achieve before joining the trillion-dollar club, to be clear. At its current market cap of $440 million, COST shares would need to gain an average of around 8.5% per year to make the company worth $1 trillion by 2036. That's no small feat.

However, Costco's stock has gained more than enough over the past 10 years to do exactly that. While past performance is no guarantee of future results, when the key drivers of that growth haven't really changed, history is a reasonably good indication of what to expect in the future.

Granted, although it's trailed COST's net return for this same time frame, KO has technically achieved the feat as well. It's only done so because of the uncharacteristic run-up just since 2024, and even then, only with reinvested dividends. You can't count on unusual action repeating itself.

There's one important nuance here. While both stocks are technically dividend payers, with a forward-looking yield of only 0.6%, COST isn't really much of an income holding. It should only be viewed and used as a long-term growth investment, albeit a good one right now after a few months of underperformance. If you need immediate income, Coca-Cola is still the better option.

James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.