Key Points
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Coca-Cola’s powerful brand stems not only from effective marketing, but from the business delivering a consistent product over time.
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The company’s incredible profitability supports a dividend that has increased for 63 straight years.
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Investors should not expect Coca-Cola shares to provide strong capital appreciation.
Coca-Cola (NYSE: KO) is a business that everyone is familiar with. It has 200 different drink products that are sold in 200 countries and territories across the globe. There are 2.2 billion servings consumed each day. And perhaps something most investors appreciate is the fact that Warren Buffett-led Berkshire Hathaway owns 400 million shares.
This is a dominant business in its industry. But could a $10,000 investment in this top beverage stock one day make you a millionaire?
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Coca-Cola has many favorable qualities
Coca-Cola is an outstanding company. One reason why is because of its strong brand. It has offered consumers across the globe consistency with its product quality while also leaning on its marketing prowess to connect on a deeper level. The brand makes up Coca-Cola’s economic moat.
The brand presence also supports pricing power. In the latest quarter (Q1 2025 ended March 28), Coca-Cola benefited from a 5% increase in prices. This is a usual occurrence. The management team understands how well the brand resonates with customers, who won’t necessarily switch to products that competitors sell.
Investors can also view Coca-Cola as a business that is resilient to recessionary pressures. That’s because its beverages are small, repeat purchases that consumers have formed habits around. I don’t believe that in tough economic times, people will immediately cut down their spending on Coca-Cola products.
This trend is playing out now, at a time when investors are worried about the uncertain macro climate. The company’s organic revenue rose 6% year over year in the first quarter, with unit volume growing 2%. This might explain why the stock is up 15% in 2025 (as of July 3), well ahead of the S&P 500 Index.
Because Coca-Cola outsources bottling and distribution activities to third-party partners, it’s able to create a more efficient organization. The result is huge profits for Coca-Cola. The business reported $3.7 billion in operating income in Q1. That was good for a superb 32.9% operating margin.
In my view, there are minimal threats of Coca-Cola ever being disrupted. The fact that the business has been around for well over 100 years is a clear sign of its durability. Unlike tech-driven industries that attract very smart entrepreneurs and a lot of capital, the beverage market goes at a slower and more boring pace. Investors can have confidence that Coca-Cola will still be relevant several decades from now.
This beverage stock is only for a certain kind of investor
As mentioned, there are many attractive traits of this company. In particular, Coca-Cola’s profitability is incredible. And there is no reason to believe this performance will change anytime soon.
That benefits shareholders directly, as Coca-Cola is a Dividend King. It has raised its payout in 63 straight years, which is an unbelievable feat. It’s a clear indication of just how great of a business this is and how long it has been successful.
This points to what I believe is the correct way to view this stock, which is that it’s only for investors seeking steady and consistent income from the companies that they own. The current dividend yield of 2.81% can provide a nice income stream for certain portfolios.
However, this stock isn’t going to give you much in the way of strong capital appreciation. Its growth isn’t anything to write home about, as Coca-Cola is an extremely mature business. In the past 10 years, the stock has generated a total return of 146%. That performance comes in substantially below the broader S&P 500 Index.
Investing $10,000 in Coca-Cola shares won’t make you a millionaire, a perspective that I’m confident in.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
