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Meet the Dividend Stock That Warren Buffett Backed for Decades. Here's Why Greg Abel Is Still Holding.
Key Points
Coca-Cola has raised its dividend for 64 consecutive years, one of the longest streaks in the market.
Berkshire Hathaway is set to receive $848 million in dividends in 2026 alone.
Coca-Cola continues to report high growth and a wider operating margin despite a challenging operating environment.
Warren Buffett has left a legacy as one of the greatest investors of his generation. He's also one of the best-known investors, and there are reams of shareholder meeting transcripts and letters available for review from Buffett with smart, sound investing advice for anyone from the professional to the layman.
Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) stock gained 5,502,284% in value during Buffett's 56-year tenure, versus a 39,054% rise for the S&P 500. Buffett grew the company by holding on to his strong principles about business and investing. He loves dividend stocks because they demonstrate commitment to creating shareholder value. They also bring in lots of cash for the holding company, which it uses for many purposes.
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The longest-held stock in Berkshire's portfolio is Coca-Cola (NYSE: KO), which has one of the best dividend-raise streaks on the market. Here's why it's one of the foundations of the equity portfolio.
Berkshire Hathaway CEO Greg Abel. Image source: Getty Images.
Coca-Cola is royalty even among Dividend Kings
Coca-Cola has raised its dividend for the past 64 years straight, through every kind of economy and market, without missing a beat. That makes it about as reliable as it gets, and it has one of the best track records of any Dividend King (stocks that have raised their dividend for at least 50 consecutive years).
Buffett said that Berkshire Hathaway spent $1.3 billion buying Coca-Cola stock over several years ending in 1988. It owns 400 million shares and has never sold any; the stock accounts for 10.4% of the whole portfolio, making it the third-largest position.
Coca-Cola pays an annual dividend of $2.12 as of February, which means that this year, Berkshire Hathaway is on track to make $848 million just from the dividend alone. Aside from price appreciation, the company has made back its initial investment several times over.
The safe and secure business
Coca-Cola stock is demonstrating unusual market outperformance this year, up 37% vs. 12% for the index. Investors are loving its resilience under pressure, as it's the anti-artificial intelligence play. Revenue increased 7% year over year in the third quarter, and operating income was up 12%. That, of course, leads to a wider operating margin, and it increased to 33.4% from 32% last year, despite inflation and higher costs.
That's right up Buffett's alley. He has praised the company time and time again for its products that everyone needs, which is why it can outlast trends and technological changes. He also loves its brand name, which draws sales from engaged consumers even through challenging times.
These are the reasons the company is performing so well today and why the stock is likely to remain a foundational holding for the foreseeable future.
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.