Is Coca-Cola Stock a Buy, Sell, or Hold in 2025?

Shares of Coca-Cola (NYSE: KO) are doing something that seems quite unusual so far this year. The stock is up 17% year to date through April 17, and is stubbornly staying near the 52-week high of $73.95 reached on April 3.

The beverage giant's share price performance is excellent considering the recent stock market volatility, which clobbered many stocks, but so far has left Coca-Cola unscathed. Part of the reason for its share price resiliency is the conglomerate's solid business performance in 2024.

With Coca-Cola stock up, what is best for shareholders to do now: buy, sell, or hold? Let's find out.

Coca-Cola's business growth

Coca-Cola's business performance has been going strong since hitting the skids during the COVID-19 pandemic. As an example, in the fourth quarter of 2024, the conglomerate experienced 6% year-over-year revenue growth to $11.5 billion while earnings per share (EPS) rose 12% to $0.51.

Q4 was only the latest quarter in a trend of steadily rising revenue and EPS in the years since both plunged amid the pandemic in 2021.

Data by YCharts.

Coca-Cola possesses many means to grow its business. According to CEO James Quincey, "By focusing on availability, basket incidence and cold drink equipment, coupled with great marketing, innovation and revenue growth management, our system recruited weekly plus drinkers, grew volume, and won share in 2024."

One example is the company's cold drink equipment, such as vending machines and grocery store coolers. Coca-Cola refers to this equipment as "one of the strongest consumption drivers in our system's toolbox."

Coca-Cola has 14 million cold drink units in operation today, and plans to expand this number. These machines are outfitted with sensors connected to the internet to deliver real-time diagnostics that help optimize sales.

Coca-Cola's stable source of passive income

Another factor contributing to Coca-Cola's share price surge is that it closed out 2024 with strong free cash flow (FCF) of $4.7 billion. The total FCF would have been $10.8 billion, a $1 billion increase over the prior year, if not for tax payments. FCF provides insight into the cash available to invest in the business, pay debt obligations, repurchase shares, and fund dividends.

Consequently, FCF is a key metric affecting Coca-Cola's dividend, currently providing a solid yield of 2.8% at the time of writing. The firm's large tax payment in 2024 was a one-off event, which is good news considering dividend payouts totaled $8.4 billion that year.

Coca-Cola's excellent FCF allowed the company to raise its dividend payment in February, marking an impressive 63 consecutive years of dividend growth. For 2025, Coca-Cola estimated FCF to reach $9.5 billion. This suggests another strong year of FCF generation ahead.

While its outstanding 2024 results caused shares to surge, the economic uncertainty introduced by President Donald Trump's tariff plans make Coca-Cola and other dividend-paying stocks more valuable. That's because if stocks drop or remain flat in a tough economy, your total return can still end up positive thanks to dividends.

As a result, if you already own shares of Coca-Cola, the best approach is to hold them. With its track record of dividend increases and strong FCF, Coca-Cola is likely to persist in providing that passive income produced by dividend payments for the long term.

To buy or not to buy Coca-Cola stock

If you own Coca-Cola shares, you shouldn't sell them, but what if you want to pick up the stock? Is now the best time to buy? To evaluate this, here's a look at the stock's price-to-earnings (P/E) ratio compared to that of its major rival, PepsiCo.

The P/E ratio is a frequently used means of assessing stock valuation. The metric tells you how much investors are willing to pay for a dollar's worth of earnings.

Data by YCharts.

About a year ago, Coca-Cola stock was valued less than PepsiCo, but with this year's share price surge, that's reversed. Currently, Coca-Cola's P/E multiple of nearly 30 is markedly higher than its competitor's, which is hovering around 21, and this indicates Coca-Cola shares are expensive relative to PepsiCo.

Therefore, now isn't the best time to buy shares. Instead, put Coca-Cola stock on your watch list and wait for the share price to drop before deciding to invest.

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Robert Izquierdo has positions in Coca-Cola and PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.