Key Points
Coca-Cola has been paying a dividend for decades and increased its payout for 64 consecutive years.
It recently yielded 2.4%.
As I've matured as an investor, I've largely switched from drooling over high-flying growth stocks to drooling over dividend payers. That's because I'm appreciating more and more the value of getting regular income directly into my financial accounts without doing anything -- and especially without having to sell any shares.
An example of a wonderful dividend-paying stock is Coca-Cola (NYSE: KO). Even Warren Buffett has held it in Berkshire Hathaway's portfolio for decades. (Coca-Cola was recently Berkshire's third-largest stock holding, worth $30 billion. Indeed, Berkshire owns 9% of Coca-Cola.)
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
So -- why Coca-Cola? Well, for starters, for its dividend -- which recently yielded 2.4%. If you were looking to generate, say, $30,000 in yearly dividends from it, you'd divide that $30,000 by the recent annual dividend amount of $2.12. That would show that you'd need 14,151 shares -- which, at the recent stock price of $87 per share, would cost you about $1.2 million.
Most of us don't have $1.2 million ready to invest, though, and if we did, we shouldn't spend it all on one stock. But that exercise does show what you might get with a $1.2 million portfolio that sports an overall dividend yield of 2.4%. You can find fatter dividends, too, and you might alternatively just opt for a simple high-quality dividend-focused exchange-traded fund (ETF).
Remember that the best dividend payers increase their payouts regularly -- and Coca-Cola has upped its payout for 64 years in a row. (The increases have been relatively modest, though.)
Coca-Cola is also attractive because it's much less volatile than the market, and during a market downturn it's likely to fall less than other stocks. And even in a recession, people won't stop buying beverages.
If you're itching to buy shares of Coca-Cola now, perhaps hold off -- because the shares seem a bit overvalued at recent levels, judging by Coca-Cola's recent forward-looking price-to-earnings (P/E) ratio of 26, which tops its five-year average of 23.
Selena Maranjian has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.