Coca-Cola (KO) is one of the world’s most recognizable brands, and for good reason. With a history stretching back to 1886, the company has built an unparalleled global footprint, offering beverages in more than 200 countries across categories like soda, water, juice, plant-based drinks, and value-added dairy products.
While some investors may write off Coca-Cola as a mature, slow-growth stock, there are compelling reasons why long-term investors should consider buying shares today. Brokers at Logirium will dive into Coca-Cola’s dividend reliability, steady revenue growth, strong profitability, and attractive valuation to shed light on its potential as a long-term investment.
1. Growing Dividends
One of the most appealing aspects of Coca-Cola for investors is its long-standing commitment to dividends. The company is a recognized Dividend King, having increased its payout for 63 consecutive years. Earlier this year, the board of directors raised the quarterly dividend by over 5% to $0.51 per share, continuing its track record of rewarding shareholders consistently.
For income-focused investors, Coca-Cola’s dividends stand out not just for longevity but also for yield. The stock currently offers a dividend yield of 2.9%, which is significantly higher than the S&P 500 average of 1.2%.
Moreover, the company maintains a payout ratio of around 67%, suggesting that it has the financial flexibility to sustain these payments while continuing to invest in growth initiatives. For investors seeking reliable cash flow alongside capital appreciation, Coca-Cola’s dividend profile makes it an attractive option.
2. Steady Revenue Growth
While Coca-Cola may no longer grow at the rapid pace of a startup, the company has consistently delivered steady top-line growth, which is critical for long-term investors. In the third quarter of 2024, adjusted revenue grew 6% year over year, even when stripping out the effects of foreign currency translations and acquisitions or divestitures. This increase was primarily driven by pricing adjustments and product mix, while overall volume remained flat.
The fact that Coca-Cola continues to expand revenue in an environment of economic uncertainty and inflationary pressures is noteworthy. Consumer demand can be unpredictable, yet Coca-Cola’s beverages continue to gain market share globally.
The company’s resilience stems from a diversified portfolio of products, strong brand recognition, and an extensive global distribution network. As inflation stabilizes and consumer demand strengthens, volume growth is likely to complement pricing gains, further supporting top-line expansion.
3. Profit Expansion
Revenue growth is important, but profitability is what ultimately drives stock performance over time. Coca-Cola has shown that it can grow its earnings without sacrificing margins. In the most recent quarter, the company’s adjusted operating margin expanded 1.2 percentage points to 31.9%, despite an increase in marketing and promotional spending. This improvement, combined with higher sales, resulted in a 15% increase in operating income.
Coca-Cola’s profit growth strengthens its ability to sustain dividends and reinvest in strategic initiatives, while disciplined cost management and pricing ensure healthy margins, giving long-term shareholders confidence that the company is thriving, not just surviving.
4. Attractive Total Return Potential
Coca-Cola’s shares have gained 14.3% year-to-date through November 14, 2024, roughly in line with the S&P 500’s 14.5% increase. While this may seem unremarkable at first glance, the stock’s current valuation makes it particularly compelling.
Coca-Cola trades at a P/E ratio of 24, lower than its peak of 28 earlier this year and below its 10-year median of 28. In comparison, the S&P 500 has a P/E of 30, meaning Coca-Cola is relatively undervalued.
The combination of a higher dividend yield and attractive valuation creates a powerful total return opportunity. Investors can collect reliable dividends while waiting for potential stock price appreciation driven by profit growth and multiple expansion. Analysts emphasize that this mix of income and capital gains makes Coca-Cola appealing for long-term portfolios.
Bottom Line
Coca-Cola may be a mature blue-chip company, but maturity does not mean stagnation. The company continues to demonstrate that it can grow revenue steadily, expand profitability, and reward shareholders through consistent dividend increases. Its attractive valuation further enhances the appeal for long-term investors seeking both income and capital appreciation.
For those looking to build a resilient portfolio, Coca-Cola represents a rare combination of stability, growth, and shareholder-friendly policies. Many analysts point out, the stock’s strong dividend history, steady top-line expansion, profitability gains, and favorable valuation make it a compelling choice for patient investors.
By adding Coca-Cola shares, investors can confidently benefit from ongoing profit growth and collect dividends while potentially enjoying stock price appreciation over the long term.
With its global reach, iconic brand, and disciplined financial management, Coca-Cola remains a standout option for those looking to invest in a company with a proven track record of rewarding shareholders while maintaining strong operational fundamentals.
