Key Points
Coca-Cola is easily a leading choice among dividend investors.
Without strong growth prospects and the likelihood of valuation expansion, shares won't generate sizable long-term capital appreciation.
The artificial intelligence revolution remains on top of investors' minds. However, it's best not to overlook the boring businesses that continue to perform well.
Coca-Cola (NYSE: KO) falls into this category. Its shares have surged 24% in 2026 (as of Aug. 4), outperforming the broader market.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Is this beverage stock a smart buy while it trades just 3% below its record high?
Image source: The Motley Fool.
Buying shares of Coca-Cola only makes sense for a specific type of investor. If you're after a steadily rising dividend stream, then this company is a smart choice. Coca-Cola has increased its dividend for 64 straight years. Credit goes to sizable free cash flow generation that can fund ongoing capital returns.
The dividend yield is currently 2.45%. Even with shares close to their all-time high, that's a healthy payout.
Investors who are after durable market-beating returns, on the other hand, will be better served looking elsewhere. Coca-Cola is crushing the S&P 500 index this year. However, over the past decade, the stock's total return of 172% has come up well short of the market's 315%.
This trend is likely to continue. That's because Coca-Cola isn't in a position to report strong revenue and profit gains. And there isn't much valuation upside, as shares trade at a price-to-earnings ratio of 26, which doesn't provide a margin of safety.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.