Learn why Coca-Cola's generous cash returns and reasonable valuation make it a compelling choice for long-term investors. And don't miss the soft drink veteran's innovative, playful side.
The iconic red can. The refreshing fizz. The familiar taste that evokes childhood memories and quenches thirst on a hot day. Coca-Cola (KO -0.46%) is a brand woven into the fabric of American life, and its stock has been a mainstay in many portfolios for decades.
But with the stock recently lagging behind the S&P 500index, some investors might be wondering: Has the fizz gone flat? Is it too late to buy Coca-Cola stock? Is the beverage industry too stodgy to serve up wealth-building investments nowadays?
Hold on just a second before you pour your Coca-Cola investing thesis down the drain. It's true that Coca-Cola hasn't exactly been a rocket ship lately, gaining only 1% in a year compared to the S&P 500's 31% surge, but there's still plenty to like about this beverage behemoth.
co*ke by the numbers
First off, let's talk valuation. Coca-Cola is currently trading at a reasonable 25 times earnings and 6 times sales. Not exactly a bargain-basem*nt price, but certainly not an outrageous ask for a company with such a dominant market position and consistent performance.
Speaking of performance, let's not forget that Coca-Cola has been steadily growing its sales at a 6.5% compound annual rate over the past five years. That's not exactly explosive, but it's certainly nothing to sneeze at for a company of its size and maturity.
And it's not like Coca-Cola is resting on its laurels, either. The company is actively exploring new avenues for growth, including leveraging the power of artificial intelligence (AI) for targeted promotions and marketing campaigns. co*ke teamed up with ChatGPT maker OpenAI to launch a brand-boosting campaign named "Create Real Magic" last spring. By the end of summer, it had introduced several limited-edition flavors of Coca-Cola and Sprite, relying on AI to suggest interesting flavor combinations.
These short-lived efforts didn't exactly change the game, but they showcased Coca-Cola's willingness to tap into soaring market trends.
The soda titan is also dipping its toes into the booming energy drink market through a strategic partnership with Monster Beverage (MNST 0.04%). It's a lucrative partnership in which Monster has managed its own energy drinks alongside Coca-Cola's energy names led by the Full Throttle and NOS brands since 2014, all distributed by co*ke's world-class global network of bottling partners. Coca-Cola also owns 19.6% of Monster's stock, giving the soft drink giant a significant financial interest in the energy drink specialist's business growth.
But perhaps the most refreshing aspect of Coca-Cola is its robust free cash flow of $9.5 billion over the last four quarters. The company is also strongly committed to returning that cash to shareholders. In the past year alone, the company has repurchased $1.7 billion worth of its own stock and paid out a whopping $8 billion in dividends. That combo hits the spot for income investors with a thirst for cash-sharing programs.
Don't hesitate to buy Coca-Cola stock in 2024
So, is it too late to buy Coca-Cola stock? I don't think so.
While past performance is no guarantee of future results, the company's strong fundamentals, reasonable valuation, and generous shareholder cash returns add up to plenty of tasty sparkle. The 3.2% dividend yield alone is reason enough to own this stock for the long haul -- just ask Warren Buffett.
Coca-Cola is a giant of its industry, as stable as solid rock, and an income-generating cash machine -- and you never know when the company might strike a chord with consumers over a new flavor or an innovative product line.
Long-term investors looking for a reliable and refreshing addition to their portfolio should consider grabbing a few shares of Coca-Cola. It's not the most exciting growth stock of 2024, but you can't really beat this sweet combo of safety and cash returns.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monster Beverage. The Motley Fool has a disclosure policy.
FAQs
Don't hesitate to buy Coca-Cola stock in 2024
Is it a good time to invest in Coca-Cola? ›
Analysts believe Coca-Cola will grow earnings by more than 6% annually over the next three to five years, so shareholders might see higher dividend growth moving forward.
What 10 stocks does Motley Fool recommend? ›
Mark Roussin, CPA has positions in AbbVie, Alphabet, Coca-Cola, Microsoft, Prologis, and Visa. The Motley Fool has positions in and recommends Alphabet, Chevron, Home Depot, Microsoft, NextEra Energy, Prologis, and Visa.
Is Coca-Cola a good stock to buy in 2024? ›
Fair Value Estimate for Coca-Cola
With its 3-star rating, we believe co*ke's stock is fairly valued compared with our long-term fair value estimate of $60 per share, which implies a 22 times multiple against our adjusted 2024 earnings estimate and a 2024 enterprise value/adjusted EBITDA multiple of 20 times.
Why not buy Coca-Cola stock? ›
Part of the reason Coca-Cola generates mediocre returns is that it has minimal growth potential. Revenue in 2023 was lower than it was in 2013. During this time, diluted earnings per share increased at a compound annual rate of 2.7%, respectively, in the past 10 years.
Does Warren Buffett invest in Coca-Cola? ›
In 2023, Buffett wrote that Berkshire's $1.3 billion investment in co*ke, made from the late 1980s through the mid-1990s, has been justified by the dividend payments alone. co*ke paid an annual dividend of $704 million in 2022.
What are the cons of investing in Coca-Cola? ›
Con: The Soda Slide
Coca-Cola's most recent earnings reports prove that people are buying fewer sugary drinks and most analysts believe that trend is going to continue. While co*ke has worked to add new, on-trend beverage offerings to its repertoire, the fact remains that KO is only operating in the beverage space.
What stock is expected to skyrocket in 2024? ›
The Best Growth Stocks of May 2024
| Company (ticker) | 5-Year Avg. Yearly EPS Forecast |
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| Nvidia Corporation (NVDA) | 37.9% |
| Full Truck Alliance Co. Ltd (YMM) | 35.9% |
| Yelp Inc. (YELP) | 29.0% |
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6 more rowsMay 2, 2024
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The Coca-Cola Company Stock Forecast
The 12 analysts with 12-month price forecasts for KO stock have an average target of 68.33, with a low estimate of 60 and a high estimate of 74. The average target predicts an increase of 10.05% from the current stock price of 62.09.
Is Coca-Cola undervalued or overvalued? ›
Intrinsic Value. The intrinsic value of one KO stock under the Base Case scenario is 52.83 USD. Compared to the current market price of 62.67 USD, Coca-Cola Co is Overvalued by 16%.
Is co*ke stock recession proof? ›
Like co*ke, Walmart and Procter & Gamble are Dividend Kings in the consumer staples sector. But Walmart has a yield below 1.5%, and P&G has a yield of 2.4%. co*ke's dividend is particularly secure thanks to the company's recession-resistant business model.
Why does Warren Buffett like Coca-Cola stock? ›
A trio of forever stocks
Buffett often groups Coca-Cola and American Express together. He praises their dominance and how they've carved out exceptional niches in their industries, with strong moats and leadership.
Is Coca-Cola the best dividend stock? ›
Coca-Cola Co.
(NYSE:KO), a dividend king, is a great bet for any investor looking for considerable liquidity at the lowest level of risk. With a market cap of $269.55 billion, Coca-Cola is the largest non-alcoholic beverage company in the world and has proven itself as a stable safe haven in the most turbulent markets.
Who owns most of Coca-Cola stock? ›
According to the latest TipRanks data, approximately 39.55% of the company's stock is held by institutional investors, 5.84% is held by insiders, and 37.93% is held by retail investors. Warren Buffett owns the most shares of Coca-Cola (KO).
Is Coca-Cola expected to go up? ›
Coca-Cola expects fiscal 2024 organic sales to grow 8% to 9%, compared with its prior forecast of a 6% to 7% rise. First-quarter net revenue rose 2.5% to $11.23 billion, beating LSEG estimates of $11.01 billion.
Is Coca-Cola a long term investment? ›
In the last 30 years, shares of the beverage giant have produced a total return (including dividends) of 1,130%. That lags the gains for the broader S&P 500. And yet, over the very long term, this top beverage stock has made for a solid investment.
How much will Coca-Cola stock be worth in 5 years? ›
Coca-Cola stock price stood at $62.01
According to the latest long-term forecast, Coca-Cola price will hit $65 by the middle of 2025 and then $70 by the middle of 2026. Coca-Cola will rise to $80 within the year of 2027, $85 in 2028, $100 in 2029, $110 in 2030 and $125 in 2033.
