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1 Reason to Hold Coca-Cola Stock for 10 Years
Key Points
Coca-Cola shares are up 35% this year versus about 11% for the S&P 500.
Price increases added about four points to sales growth last quarter, yet volume still rose 5%.
The stock yields about 2.2%, and the dividend has risen for 64 straight years.
Coca-Cola (NYSE: KO) shares are up about 35% this year as of midday trading on Nov. 3, beating the S&P 500's (SNPINDEX: ^GSPC) roughly 11% gain. Even at this valuation, the best reason to hold it for the next decade hasn't changed: Coca-Cola can raise prices without losing customers.
That's rare in consumer goods, where shoppers often trade down when prices rise. Last quarter, Coca-Cola's price increases added about four percentage points to sales growth, yet unit case volume still grew 5% year over year.
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Over the past 50 years, Coca-Cola's annual volume has declined only once, during the pandemic, and research firm Kantar ranked Coca-Cola the world's most valuable food and beverage brand. Management's long-term plan is to balance unit volume growth with price increases. Over a decade, that steady combination can compound earnings and dividends.
Image source: Getty Images.
Strong brand power doesn't mean Coca-Cola can't see slower growth. Management said cost pressures have intensified and expects value to remain a major concern for consumers in 2027. If Coca-Cola can't raise prices enough to cover its costs, margins could shrink, and its pricing power would look weaker.
Still, investors get paid to wait. The stock yields about 2.2%, about twice the S&P 500's yield, and Coca-Cola has raised its dividend for 64 straight years. With fourth-quarter results and the first 2027 guidance due in February, investors will soon see whether that pricing power carries into next year.
John Ballard 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.