In a Volatile Market, This Dividend Growth Stock Is Worth Every Penny of $1,000

The S&P 500 is heading for a gain of nearly 10% this year, adding to its 78% increase over the past three calendar years. Excitement about artificial intelligence (AI) stocks drove this extraordinary momentum.

But stocks have also experienced declines in recent months and a fair share of volatility. This was due to a variety of factors, from turmoil in Iran to concerns about the U.S. economy and the high levels of technology spending. Though worries have eased, it's still a good idea to remember these times of volatility and prepare for the next similar phase.

What sort of stock is good to own in such an environment? You should seek out well-established companies with solid competitive advantages and a track record of reliable growth. And those that pay dividends are particularly attractive. Before you look any further, consider this dividend growth stock that, in a volatile market, is worth every penny of a $1,000 investment.

Image source: Getty Images.

A $1,000 investment or even less

First, it's important to note that you don't have to have $1,000 to invest in this particular stock. You could pick up a share or two for much less, since it trades for about $80 -- or if you have a bigger investment budget, you could buy several shares, which would increase your dividend income opportunity. So, a wide range of investors may easily access and potentially gain from investing in this stock.

Which company am I talking about? Coca-Cola (NYSE: KO), a company known for its eponymous beverage as well as a wide variety of well-known brands, from Minute Maid juices to Dasani water. The world's largest non-alcoholic beverage maker has a wide moat, or competitive advantage, in the form of its brand strength and its distribution network. These are elements that have kept Coca-Cola in consumers' glasses around the world for decades.

And speaking of around the world, the company is present in 200 countries and tailors products to satisfy the tastes and buying habits of local consumers.

A track record of growth

All of this has helped Coca-Cola establish a long track record of earnings growth and the ability to manage difficult environments. For example, even as commodity pressures in tea and coffee and geopolitical turmoil in the Middle East represented headwinds in the recent quarter, Coca-Cola remained generally resilient. The company reported a 12% increase in net revenue to more than $12 billion and gained in value share for a 20th consecutive quarter.

Though Coca-Cola won't deliver the kind of explosive growth you may experience with a technology growth player, the company has proven its ability to offer investors steady growth they can count on over the long run.

Now, let's talk dividends. Coca-Cola is a Dividend King, meaning it's increased its dividend payments for at least 50 straight years. This is fantastic because it shows the company is committed to rewarding shareholders, suggesting it's likely to continue along this path. It's also important to note that Coca-Cola has the financial strength to make this happen, as we can see through the company's free cash flow levels.

KO Free Cash Flow data by YCharts

So Coca-Cola has both the desire to lift its dividend over time and the means to do so. This means that, when you buy Coca-Cola shares, you can be pretty confident that your dividend income will increase over time. Today, Coca-Cola pays a dividend of $2.12, representing a yield of 2.6% -- that surpasses the 1% dividend yield of the S&P 500.

Finally, let's consider Coca-Cola's valuation. The company trades at 24x forward earnings estimates. This isn't the cheapest it's been in recent years, but it remains in reasonable territory. In fact, over the past three years, the stock has traded between 20x and 25x forward earnings estimates -- valuation hasn't swung wildly from one extreme to the other.

All of this shows that Coca-Cola, in a volatile market or really at any time, is a stock that's worth every penny of your $1,000 investment.

Adria Cimino has 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.