4 Reasons to Buy Coca-Cola Stock Like There's No Tomorrow

Key Points

• Coca-Cola’s business isn’t one that lends itself to rapid growth.

• Its business supports reliable profitability that’s largely passed along to shareholders as dividends.

• As the adage goes, slow and steady wins the race (or at least ties, in this case).

• 10 stocks we like better than Coca-Cola ›

If you're looking for an exciting investment, Coca-Cola (NYSE: KO) isn't it. Its growth is slow, as is the entire beverage market's. After all, there's only so much the world's population will be able to drink during any given day, week, month, or year, and there are plenty of companies offering thousands of options. There's not a lot of creative innovation that's going to change this, either.

However, most people don't (or shouldn't) invest for entertainment. The priority as an investor is to use capital to achieve financial goals at the lowest possible degree of risk. Sometimes investors do this well; other times, they are a bit off the mark. Balancing risk against realistic potential reward is a huge part of being a successful investor.

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There are four key reasons investors might want to step into a healthy stake in The Coca-Cola Company as soon as they feasibly can.

Image source: Getty Images.

1. Coca-Cola has several of the best brand names in the business

You probably already know that its namesake cola is the world's most popular soda. But this company is so much more. Sprite, Fanta, and Barq's root beer brands of carbonated beverages are also Coke's, as are Gold Peak tea, Dasani water, Fresca, and Costa coffee. Powerade sports drink, Minute Maid juices, and several other familiar names are part of the Coca-Cola family of products as well.

So what? It means the beverage giant casts a wide net, and is able to appeal to consumers' ever-changing preferences, like their slow shift away from sugary sodas and toward healthier options like its Glaceau-branded Smartwater and Vitamin Water.

2. Coca-Cola's size matters

Veteran investors understand that smaller companies tend to be nimbler and faster-moving than larger ones, which has its obvious advantages.

Smaller isn't necessarily better for every industry, though. Indeed, in a business like beverages that isn't constantly changing, sheer size means leverage. For instance, since Coca-Cola's able to create advertising-driven demand for its goods that brings people into grocery stores, grocers are more likely to prominently feature its brands in their stores, and ensure they keep plenty of these products on hand.

Being a key source of traffic and revenue in several different categories of beverages also means Coca-Cola's sales representatives are well-positioned to sell in bulk at favorable terms, or create strategic sales alliances.

3. Coca-Cola's business model is well-shielded from inflation and allows for focus

Perhaps the most important operational detail that makes Coca-Cola stock a great long-term investment is also the one that's least obvious to investors. That is -- unlike rival PepsiCo (NASDAQ: PEP) -- Coca-Cola does very little of its own bottling these days. It punts the bulk of this work to third-party bottling partners that make the product closer to where it's consumed. By simply selling its flavored concentrates to these bottlers, Coca-Cola can focus on what it does best -- marketing and promotion.

This shift away from production has proven either very prudent, very lucky, or both. Given that the bulk of the variable (and sometimes volatile) cost of being in the beverage business is incurred at the bottling stage, Coca-Cola itself hasn't seen its profit margins pinched to nearly the same degree that its various bottling partners and PepsiCo have. In fact, Coca-Cola's recent operating and profit margin rates showed some measurable widening.

Data by YCharts.

To this end, know that Coca-Cola hasn't failed to report at least some degree of profit in every single quarter for well over a decade now, with steady growth being logged for most of that span.

4. The dividend (and the dividend's pedigree, and the dividend's health)

Perhaps the chief reason any investor might want to buy Coca-Cola stock like there's no tomorrow is its dividend. It's better than most in several ways, and second-to-none in a few.

The most compelling detail here isn't just how long the company's made quarterly dividend payments, but how reliably it's raised them. In February of this year, Coca-Cola's Board of Directors approved the organization's 63rd annual increase in its yearly per-share dividend payment, easily qualifying it as a Dividend King. In fact, only eight other companies boast a longer history of sustained dividend growth.

These aren't chump-change increases, either. Over the course of just the past 10 years, the quarterly per-share payment has grown from $0.33 to $0.51, or an annualized increase of a little over 4.4% that easily outpaces inflation for that stretch.

The company can readily afford its generous dividend payments, too. The $2.04 per share worth of dividends it's going to dish out for all of 2025 is well below the earnings of $2.98 per share that analysts anticipate.

Don't dismiss the value of this slow-but-steady cadence of dividend payments and dividend growth. While it's certainly not a growth stock by most meanings of the term, since the beginning of 1990, reinvesting this stock's dividend payments in more shares of Coca-Cola would have almost resulted in an S&P 500-matching net gain, with measurably less volatility on the way up.

Data by YCharts.

This growth, of course, underscores the effect of time and consistency.

Newcomers would be plugging in while Coca-Cola stock's forward-looking dividend yield stands at a respectable 3%.

The last word

Is Coca-Cola a sexy must-have name? Nope. Not even close. But that's kind of the point.

Again, don't fall into the trap of chasing every hot story stock for its entertainment value. Such tickers can be tricky to trade, since they're often pushed around by ever-changing headlines as well as fickle investors. For every now-obvious winner like artificial intelligence titan Nvidia, there's at least one disappointment like electric vehicle maker Rivian or fuel cell outfit Plug Power, both of which were creating a similarly bullish buzz around the same time Nvidia shares began their incredible rally. Sometimes something simpler and safer is not only easier to own, but better in terms of your bottom line.

That idea certainly seems to make sense with Coca-Cola here, especially in the shadow of the stock's shallow pullback from April's peak. That may be all the discount you're going to see for a while. Don't overthink it (which is certainly easy to do in this noisy environment).

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

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James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.