In the face of rising macroeconomic headwinds and geopolitical tensions, investors are seeking safe havens, and passive-income stocks that provide a consistent income stream are an attractive option. Coca-Cola (NYSE:KO), a member of the elite group of “Dividend Kings” in the S&P 500 Index, stands out with a track record of increasing dividends for 61 consecutive years, showcasing the stability of its operations.
Coca-Cola has shown resilience despite concerns about rising inflation affecting consumer spending. The company reported strong revenue and profit growth, even amid high prices. While its stock has dipped nearly 11% year-to-date, Wall Street analysts recommend it as a “strong buy.”
Coca-Cola’s ability to generate substantial revenue is attributed to its iconic brands, including Coca-Cola, Diet Coke, Fanta, and Sprite, which enjoy global popularity. This brand strength has led to market dominance, pricing power, and customer loyalty, all of which are crucial for financial stability.
The company has diversified its portfolio to include non-carbonated and healthier options to adapt to changing consumer preferences. Despite price hikes, Coca-Cola’s customer loyalty paid off in the third quarter with an 8% year-over-year revenue increase to $12 billion. The company exceeded consensus estimates, and net earnings per share (EPS) increased by 9% for the quarter to $0.71.
Coca-Cola’s pricing power allows it to maintain stable profit margins, and it can raise prices to offset rising raw material costs, thanks to its brand loyalty. Management highlighted strong consumer strength in Latin America, India, and certain regions of Central and Southeast Asia.
The company’s positive free cash flow of $9.5 billion for the year allows it to continue paying and raising dividends while supporting growth strategies. Coca-Cola offers an attractive dividend yield of 3.3%, well above the S&P 500’s average.
After upbeat Q3 results, analysts at Wells Fargo and Barclays raised their target prices for Coca-Cola. Out of 14 analysts covering the stock, 11 have a “strong buy” recommendation, 1 suggests a “moderate buy,” and 2 call it a “hold.” The average price target of $66.36 indicates a potential upside of about 20.1% in the next 12 months.
Coca-Cola has displayed remarkable resilience with consistent growth in its top and bottom lines over the last five years. Its status as a “Dividend King” reflects its commitment to rewarding shareholders, making it an appealing option for both growth- and income-oriented investors, especially during the current share price pullback.
Featured Image: Unsplash
Author Faith Yakubu 
