Warren Buffett Owns $29 Billion of This Top Dividend Stock: Could It Make You a Millionaire One Day?

Warren Buffett has an unbelievable track record of allocating capital for Berkshire Hathaway. That's why many investors follow his moves closely in the hopes of finding a great idea they can take advantage of.

The massive conglomerate owns dozens of businesses in its public equities portfolio. But there's one well-known brand that it has a $29 billion stake in (as of March 1), making it the company's fourth-largest position.

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Can this top dividend stock make you a millionaire one day?

A safer investment

The Oracle of Omaha has owned Coca-Cola (NYSE: KO) shares for decades. Clearly, there must be some positive factors that Buffett appreciates about the business.

Coca-Cola possesses a wide economic moat that cements its position in the non-alcoholic ready-to-drink beverages market. The company's brand is its most important asset. It's been developed over decades of delivering a consistent product experience to customers. The fact that Coca-Cola has a presence in more than 200 countries around the globe speaks to the broad demand it sees.

Having a highly regarded brand results in pricing power. In the latest quarter (Q4 2024, ended Dec. 31, 2024), the company benefited from a 9% increase in prices. Some of this was due to hyperinflation in certain countries, with the "remainder driven by pricing actions in the marketplace and favorable mix."

During Q4, Coca-Cola reported 6% revenue growth. That was helped by a 2% bump in unit volume, an encouraging trend. China, Brazil, and the U.S. exhibited strong demand.

Coca-Cola's profitability is more impressive, with an operating margin of 23%. It has supported a dividend that currently yields 2.82%, and that has increased for a jaw-dropping 63 years. Investors will struggle to find companies with this stellar track record of returning excess cash to shareholders.

As of March 1, Buffett's conglomerate owned 400 million shares of Coca-Cola. Based on the upcoming quarterly dividend payout of $2.04 per share, Coca-Cola will generate a whopping $816 million in income for the Omaha-based enterprise on an annualized basis. It's no wonder Berkshire maintains its position.

Coca-Cola isn't for everyone

Coca-Cola certainly has some favorable characteristics that can draw in investors looking for high-quality businesses. However, it lacks meaningful growth prospects. 2024 revenue of $47.1 billion was just 2% higher than a decade before in 2014.

That's not surprising, given it's a mature company in a slow-moving industry. Some investors might view this as an advantage, though.

Coca-Cola isn't posting strong revenue gains. But it does have incredible durability. You can have a very high degree of confidence that 50 years from now, this company will not only still be relevant, but will continue to lead the industry. There's minimal threat of disruption or obsolescence. That's impossible to say about the vast majority of businesses.

The company's staying power is reflected in the valuation. As of this writing, shares trade at a price-to-earnings ratio of 29.3. That's 11% more expensive than the trailing five-year average, and it represents a premium to the overall S&P 500. That's despite Coca-Cola, which has produced a total return of 126% in the past 10 years, lagging the widely followed benchmark. The valuation isn't compelling, to say the least.

While the stock won't outperform the S&P 500 over the long term, buying and holding it makes sense for investors who want to earn steady income from their holdings. But at the end of the day, Coca-Cola is far from being a millionaire-maker.

Should you invest $1,000 in Coca-Cola right now?

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Neil Patel and his clients have 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.