Where Will Coca-Cola Stock Be in 5 Years?

It's been an interesting year so far for the stock market, to say the least, and in an unusual occurence, Coca-Cola (NYSE: KO) stock is absolutely crushing it. Investors are loving its rock-solid stability, top dividend, and resilience in the face of increased tariffs.

But is this a fluke? Will Coca-Cola go back to being a market laggard when the economy settles down? Let's see where Coca-Cola might be five years from now, and whether or not it makes sense to buy it today.

Image source: Getty Images.

Revenue and profits: Increasing

Coca-Cola has been doing a fabulous job of generating sales, despite what's been a wild few years. CEO James Quincey came on board in 2018, just in time to get the company into better shape before the pandemic. It had been losing ground to competitors, but it had started to demonstrate rapid growth, and it was well-positioned to withstand pressure at that time. Coca-Cola restructured in the wake of the pandemic, and with its pared-down brand portfolio and efficient systems, has remained in growth mode for most of the time. Here's how sales have fared over the past five quarters.

Data source: Coca-Cola quarterly reports.

If inflation eventually tapers off, Coca-Cola's growth is likely to accelerate. It's the largest beverage company in the world, and will likely stay that way for the foreseeable future.

Coca-Cola is also a profit machine. It has loyal fans the world over who it can count on to buy their favorite beverages, and it has an efficient distribution system. Here's how earnings per share (EPS) have changed over the past five quarters.

Data source: Coca-Cola quarterly reports.

Business: Acquiring new brands and innovating in other ways

Coca-Cola's model works. Its core Coca-Cola branded beverages do the heavy lifting for the company, but it acquires new brands that boost revenue at a higher rate. It can easily integrate these new brands into its robust, global distribution system, which breathes life into sales while more efficient distribution improves margins.

Although the company sliced its brand portfolio in half when it restructured, the labels it cut were mostly small, local brands that accounted for 1% of sales. The new acquisitions it's made since then are large, global brands that enhance the company's total business.

Expect Coca-Cola to keep bringing out new flavors and beverages over the next five years, like it always does, to keep customers coming back and generate new demand.

It has also innovated in other ways recently, to keep customers buying while costs rise. Although it has a good amount of pricing power and has been able to raise prices without curbing demand, it has released small bottle types and cheaper packaging to keep prices down. It's also experimenting with technology as much as a consumer goods product can, such as using artificial intelligence (AI) to track consumer preferences by region and launch flavors that can succeed locally.

Dividend: Getting five raises

Now for the all-important dividend piece. Coca-Cola is a Dividend King, and it has raised its dividend for the past 63 years straight. There are just over a handful of stocks on the market that can surpass that sterling record, making Coca-Cola a steady choice for reliable and growing passive income. For retirees and others who depend on getting a check in the mail, this is a huge attraction.

But Coca-Cola's dividend is also higher than the typical Dividend King's. It yields about 2.8% at the current price, but it's usually around 3%. Shareholders like Warren Buffett, who has owned Coca-Cola stock since 1988 and praises it all the time, know they can count on Coca-Cola for dividend income.

In five years, Coca-Cola is almost guaranteed to raise the dividend another five times.

Bottom line: Reliable for passive income and stability

It's impossible to know whether or not Coca-Cola stock will beat the market in five years. In general, it doesn't beat the market; it's a slow-growing giant, and while the stock rises, that's not been its attraction over the past few years. It tends to beat the market when there's uncertainty and investors rush to safe stocks.

This pattern of lagging the market may change because Coca-Cola is finally back in growth mode. It may be hard to believe if you haven't tracked Coca-Cola stock for very long, but revenue is finally back to where it was 10 years ago, surpassing its previous high only last year. As the company becomes even stronger and keeps growing, investors might start prizing it more, even in good times.

But even if it's not beating the market in five years, it has lots to offer investors in its dividend and stability. Every investor should have some anchor stocks in their portfolios, bulwarks for tough times, and Coca-Cola can be one of those stocks.

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Jennifer Saibil 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.