Have you ever thought about investing? What about Coca-Cola? Investing means being patient because small amounts of money can give you great results. A great example of this is Coca-Cola, one of the most popular companies in the world, right? So, if someone had invested $1,000 in Coca-Cola stock in 1995, this person would have had around $9,030 today. It’s not a bad investment if you ask me. But, let’s see how this increase can be explained and what investors can learn from this.
The power of long-term investment
When we invest in a stock like Coca-Cola’s, there are two main ways of gaining money:
- Stock price appreciation – when the value of the shares goes up.
- Dividends – payments the company makes to shareholders from its profits.
Going back to the Coca-Cola example, dividends have been crucial. Out of those $9,030 the investor would have had today, about $4,270 come from the increasing of the stock price. However, the $4,760 belong to accumulated dividends during 30 years.
This means that almost half of the profit comes directly from dividends, which makes Coca-Cola one of the favorites for those who look for stable income rather than explosive growth.
The Dividend King
One of Coca-Cola’s main strengths is that it keeps growing its dividends for 63 consecutive years. It is not many companies around the world that can brag about something like that… For this reason, this company is considered a ‘’Dividend King’’, a term used in the finance field for companies that have increased dividend payouts for decades.
Right now, Coca-Cola’s dividend yield is about 2.9%, far higher than the S&P 500 average of 1.2%. For investors looking for steady passive income, that’s a very attractive figure.
Comparison with S&P 500
Even though the ”Dividend King” is showing great results, it’s not the most profitable company in comparison to the general market. If those same $1,000 would have been invested in S&P 500 in 1995, today the value would be around $20,000 (more than double what Coca-Cola produced).
This shows that the ”Dividend King” is a strong and reliable company, but it doesn’t have the stock with the highest capital growth.
Warren Buffet’s example
The famous investor Warren Buffet is one of the most popular shareholders of Coca-Cola. His company, Berkshire Hathaway, bought around $400 million worth of Coca-Cola stock in the late 1980s and hasn’t sold since 1994.
Since Buffet bought earlier than 1995, his returns are even greater than the numbers above. But what is more interesting is that since 1994, Buffett has not reinvested the dividends into buying more Coca-Cola stock. This suggests that what he values most is the steady income, not the potential for major price growth.
So, is it a good idea to invest in Coca-Cola now?
Experts consider that this company is a mature stock, more about stability than explosive growth. So:
- If your goal is steady passive income, Coca-Cola remains attractive thanks to its reliable dividends.
- If you’re looking for fast capital growth, other options—like technology stocks—may offer more upside potential.
Basically, the lesson to learn here for those investors is that the ”Dividend King” is not the most exciting nor the fastest-growing stock, but it is one of the most reliable for investors who value stable income over flashy growth. That is why this company continues to be a favorite in the world of investing. We know investing is not easy, you need to study a bit more the market but if you were willing to invest, and after reading this article, would you choose Coca-Cola as one of your choices?