Warren Buffett’s investment strategy emphasizes acquiring high-quality companies with economic moats, which are durable competitive strengths that protect businesses from competitors. This approach is evident in Berkshire Hathaway’s significant $277 billion public equity portfolio.
Berkshire Hathaway owns stakes in numerous companies, including 400 million shares of a leading dividend stock. Observers are considering whether this is a must-buy opportunity in May.
### Steady Performance Amid Uncertainty
In light of the stock market trends in 2025, investors are concerned about potential economic downturns and an impending recession. Nonetheless, this situation poses little worry for Coca-Cola, a favored company of Buffett. In the first quarter of 2025, Coca-Cola surpassed Wall Street expectations, with $11.2 billion in adjusted revenue, remaining stable compared to the previous year.
Coca-Cola closely monitors volume trends, reporting a 2% increase in unit sales from the previous year. Strong markets include countries like India, China, and Brazil. Notably, Coca-Cola Zero Sugar experienced a 14% volume increase globally.
The company demonstrated its pricing power during the quarter, with a positive 5% impact on pricing and mix. While volume growth may be limited due to Coca-Cola’s global presence, the brand’s strength contributes to its competitive moat, ensuring strong customer loyalty.
### Profits Driving Dividends
While Coca-Cola is renowned for over 200 beverage products, it relies on third-party partners for bottling and packaging, resulting in a profitable operation. The company reported a 29.9% net income margin in the first quarter, up from 22.6% in 2024. This profitability benefits Buffett and Berkshire significantly.
Coca-Cola is a dividend leader, having increased its quarterly payout for 63 consecutive years. The company’s profitability minimizes the risk of this income stream diminishing. Berkshire’s 400 million shares yield $204 million in quarterly passive income, amounting to $816 million annually. Buffett has retained his shares in Coca-Cola since acquiring them in 1988, drawn by the reliable income stream.
### Market Performance Expectations
Coca-Cola offers stability to portfolios, which may appeal to investors in the current market climate. However, it is not expected to outperform the market over the long term. The company has underperformed against the S&P 500 over the past five to ten years, which is likely to continue.
The price-to-earnings ratio currently stands at 29.3, nearing the most elevated level in the past year. This high valuation persists despite projections of earnings per share growing at a compound annual rate of 6% from 2024 to 2027. Only income-focused investors might consider Coca-Cola a must-buy in May, as the dividend yield is 2.82%. While this follows Warren Buffett’s investment pattern, Coca-Cola is unlikely to yield significant capital appreciation.
