Could This Bear Market-Buy Help You Become a Millionaire?

Key Points

• Coca-Cola has comfortably outpaced inflation over the past few decades.

• Its brand recognition, scale, and diversification could drive its long-term growth.

• However, investors shouldn’t count on it for millionaire-making gains.

• 10 stocks we like better than Coca-Cola ›

Coca-Cola (NYSE: KO), the world's largest beverage company, is often considered a safe stock to buy during bear markets. It's withstood wars, recessions, stock market crashes, and other economic shocks since its public debut in 1919, and raised dividends annually for 63 consecutive years. But it's not really known as a millionaire-making stock.

Over the past 30 years, Coca-Cola's stock rallied nearly 320% and generated a total return of almost 780% after including its reinvested dividends. That was a decent gain, but the S&P 500 (SNPINDEX: ^GSPC) soared 1,030% during those three decades and delivered a total return of 1,860%.

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Therefore, a $10,000 investment in Coca-Cola in 1995 would be worth about $88,000 today (with reinvested dividends), generating roughly $2,600 in annual dividends. That's a safe return that would have easily beat inflation, since a product that cost $10,000 in 1995 would cost approximately $21,000 today.

But should investors count on this resilient blue chip stock to outperform the market and generate millionaire-making gains over the next few decades?

Why is Coca-Cola's business so resilient?

Coca-Cola only produces concentrates and syrups for its drinks, while its bottling partners actually produce and sell the finished beverages. That capital-light approach helps it maintain tight controls over its costs while generating stable cash flows and profits.

To counter declining soda consumption rates, Coca-Cola expanded its portfolio with more brands of bottled water, teas, fruit juices, sport drinks, energy drinks, coffee, and alcoholic drinks. It refreshed its flagship sodas with sugar-free versions, smaller serving sizes, and new flavors.

That flexibility enabled Coca-Cola to grow at a consistent rate, even as recessions and other macro headwinds rattled the global economy. From 1994 to 2024, its EPS grew at a steady compound annual growth rate (CAGR) of 5%, while its annual free cash flow (FCF) increased at a CAGR of 3%.

What will happen to Coca-Cola over the next 30 years?

Several trends could impact Coca-Cola over the next three decades. The secular shift toward healthier drinks could erode its soda business and drive it to aggressively acquire more health-oriented beverages. Tougher regulations -- including sugar taxes, mandatory health warning labels, and environment restrictions on plastic bottles -- could exacerbate that pressure.

Coca-Cola sells its products in more than 200 countries, but it's saturated its developed markets and is relying on less stable emerging markets to drive its growth. It still faces stiff competition from smaller regional brands, while the unpredictable headwinds from geopolitical conflicts, inflation, and currency fluctuations could further throttle its sales.

Nevertheless, Coca-Cola's scale and diversification should help it overcome those challenges. It will continue to pour its excess cash into buybacks to boost its EPS, and should maintain its crown as a Dividend King as it keeps raising its dividends. If it can keep growing its EPS at a CAGR of 5% from 2024 to 2054, its EPS would rise from $2.46 to $10.63.

Assuming it trades at a reasonable 20 times trailing earnings, Coca-Cola's stock price would more than triple to about $213 over the next 30 years. That would be a decent long-term gain, but it wouldn't make you a millionaire unless you had invested more than $320,000 in the stock.

A stable safe-haven stock, not a millionaire-maker stock

Coca-Cola won't help you become a millionaire on its own, but it's a stable safe-haven play that will hold steady in challenging and unpredictable macro environments. However, investors should be aware that its stock tends to underperform the S&P 500 -- which has generated an average total return of 10% since its inception. It's also underperformed Berkshire Hathaway, which owns 9.3% of the beverage maker's outstanding shares.

So while Coca-Cola might be a safe stock to hold, it arguably works best as a reliable dividend-generating anchor in a diversified portfolio. Putting all of your savings in Coca-Cola might protect you from inflation, but it won't make you a millionaire, and you might miss out on some much richer gains.

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Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.