This year’s top-performing Dow stock continues to show potential for future growth.
In the realm of beverage stocks, Coca-Cola (KO) stands out. The company’s portfolio extends beyond its flagship soft drink, encompassing roughly 200 brands across categories such as sparkling beverages, hydration, coffee, tea, juice, and dairy. Additionally, Coca-Cola has ventured into alcoholic offerings through partnerships.
With a history spanning 135 years, Coca-Cola is a well-established brand with a global footprint in over 200 countries. This could be an opportune moment to consider investing in this influential company. Below are some reasons why Coca-Cola’s stock appears promising.
1. Coca-Cola’s Performance
While there may be underperforming stocks in many portfolios, Coca-Cola is not one of them. Fewer than 10% of U.S. stocks have achieved double-digit gains this year, yet Coca-Cola has seen its shares rise by 17% in 2025, increasing by 25% over the past year and 52% over the last five years. It ranks as the second-largest stock by market cap with such gains.
Coca-Cola’s robust performance isn’t surprising given its affordable and ever-popular products. Despite inflationary pressures potentially affecting consumer behavior, the company could offset any reduction in case volumes through increased revenue and earnings. Coca-Cola remains a low-beta stock known for consistent high-level performance.
The current economic climate may even favor Coca-Cola. While PepsiCo’s shares have dropped by 6% in 2025 and 16% over the past year, Coca-Cola is better positioned against trade-related challenges. PepsiCo relies on Ireland for much of its syrup production, whereas Coca-Cola primarily manufactures its concentrate in the U.S. and territories. Coca-Cola benefits from bottling and distribution occurring domestically or through independent bottlers, maintaining a net margin of over 22% for six consecutive years.
2. Reasonable Valuation
Coca-Cola’s stock is just 1% below its all-time high reached earlier this month. While only 6% of exchange-traded stocks are within 3% of their all-time peak, Coca-Cola leads these by market cap. Despite its soaring price, the stock is priced at 25 times this year’s expected earnings and nearly 23 times next year’s projected profits. Coca-Cola’s history of resilient growth, even amidst economic downturns and shifts away from sugary and diet sodas, justifies its market premium.
The stock’s revenue increased by 26% and operating income by 35% from five years ago, while the stock’s price has jumped 52%. Although not considered a bargain at today’s multiples, Coca-Cola has a track record of surpassing earnings expectations, evidenced by consistent quarterly earnings beats throughout the year.
| Period | EPS Estimate | Actual EPS | Surprise |
|---|---|---|---|
| Q1 2024 | $0.70 | $0.72 | 3% |
| Q2 2024 | $0.81 | $0.84 | 4% |
| Q3 2024 | $0.75 | $0.77 | 3% |
| Q4 2024 | $0.52 | $0.55 | 6% |
These favorable outcomes suggest Coca-Cola is trading at slightly less than 25 times what it ultimately will earn this year and moving forward.
3. Consistent Dividends
While Coca-Cola’s revenue may not increase annually—partly due to the divestment of its bottling operations—the consistent rise in its quarterly dividends remains highly probable. In February, Coca-Cola raised its payout for the 63rd consecutive year, now offering a yield of 2.8%. This dividend is likely to become more attractive if the economy slows and interest rates decline. With its forward dividend at less than 70% of projected earnings, Coca-Cola ensures ample flexibility to maintain its streak of growing dividends.
Rick Munarriz holds no positions in the stocks mentioned, and The Motley Fool has no positions in these stocks. The Motley Fool’s disclosure policy applies.
