Is Coca-Cola Still a Good Dividend Growth Stock to Buy in 2025?

Key Points

• Coca-Cola has increased its dividend for 63 consecutive years.

• Its payout ratio is around 80% and challenging macroeconomic conditions could result in just single-digit profit growth this year.

• 10 stocks we like better than Coca-Cola ›

Coca-Cola (NYSE: KO) is a top beverage company that investors have come to rely on for its dividend. With a yield of 2.9%, the stock can provide you with a fantastic payout -- the S&P 500 average yield is only 1.2%.

But with changing market dynamics and potentially more challenging economic conditions ahead, the company's growth rate may be a bit light in the near term, which could impact its rate of future dividend increases. Could the company's historically safe dividend be in trouble, or is Coca-Cola stock still a good option for dividend investors to consider today?

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Coca-Cola has continually been growing its dividend at decent rate

One of the most attractive features of Coca-Cola stock is that it has routinely increased its dividend, not only in recent years but for decades. And earlier this year, it announced that it would be increasing its dividend for a 63rd consecutive year. It was a bump up of more than 5%.

KO Dividend data by YCharts

Over the past decade, the company's quarterly payouts have risen by around 55%, which averages to a compounded annual growth rate of 4.5%. That's a decent rate that in most years should be comfortably higher than the rate of inflation.

The big question for investors today, however, is whether Coca-Cola's level of profitability is strong enough to leave room for more rate increases in the future, because while it has been a good dividend growth stock in the past, that doesn't automatically mean that increases to its payout will continue in the years ahead.

Its payout ratio remains at around 80%

A stock's payout ratio tells investors just how much of earnings a business is paying in the form of dividends. The lower the ratio, generally the safer the dividend is. Over the past five years, Coca-Cola's payout ratio has averaged around 80%, and currently it's a few percentage points below that.

KO Payout Ratio data by YCharts

The good news is that even despite economic uncertainty and volatile geopolitical conditions, Coca-Cola expects to grow its revenue organically this year, between a rate of 5% to 6%. It does, however, expect a slower growth rate on the bottom line, projecting that its comparable earnings per share will increase by no more than 3%, as the company is facing currency-related headwinds.

However, the business does still look to be heading in the right direction.

Is Coca-Cola stock still a good option for dividend investors?

Coca-Cola remains a top dividend growth stock to buy and hold for the long term. With an iconic brand and its business adapting to changing consumer preferences and tastes, Coca-Cola has shown that it can perform well even under changing market conditions. And that's the type of stock that investors can safely hold for the long haul.

Entering trading this week, the stock has remained a solid buy, generating year-to-date returns of around 15%. Overall, if you want a good dividend stock that you can put in your portfolio and not worry about, Coca-Cola can make for an excellent option.

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David Jagielski 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.