Coca-Cola Stock: What a $1,000 Investment Is Worth Today

Cans of Coca-Cola and Zero Sugar Coca-Cola in ice

Few companies have Coca-Cola's (KO) track record when it comes to returning cash to shareholders, but as a defensive dividend machine, KO stock hasn't been able to keep up with the broader market in the past couple of decades.

The Buy-rated Dow Jones stock remains one of Wall Street's favorite names in the consumer staples sector, but truly long-term shareholders would have been better off putting their cash in an S&P 500 index fund.

That might come as something of a surprise, given Coca-Cola's global reach and impeccable blue-chip credentials. No less an investing eminence than Warren Buffett has maintained a massive position in the fizzy drinks maker for nearly four decades.

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The Oracle of Omaha drank Coca-Cola — and studied its business — for more than 50 years before adding it to the Berkshire Hathaway equity portfolio in the late 1980s.

To this day, KO is the holding company's fourth-largest position. With a stake of 400 million shares worth about $26 billion, KO accounts for almost 10% of Berkshire's U.S. stock portfolio.

Buffett's affinity for Coca-Cola is due in no small part to all the cash it returns to shareholders. As a member of the S&P 500 Dividend Aristocrats, KO is about as reliable a dividend grower as they come. The company has increased its payout annually for more than six decades.

KO has also been generous in returning cash to shareholders through stock buybacks. In the past five years, Coca-Cola has spent an average of $154 million per quarter to repurchase its own shares.

That's what a mature company in Coca-Cola's position needs to do to keep shareholders happy. With average annual revenue growth of only about 3% in the past two decades, KO isn't exactly a growth stock.

The bottom line on Coca-Cola stock?

It shouldn't come as a surprise that a defensive dividend payer such as KO trails the broader market over the past couple of decades. As a low-beta stock, KO tends to lag the S&P 500 when the market is rising, but also holds up better when everything is selling off.

A long bull market driven by outsize gains in tech and communication services stocks is going to leave defensive names behind.

That's partly why KO stock lags the S&P 500 on an annualized total return basis over every standardized time frame beyond one year. In the past three-, five-, 10- and 15-year periods, KO lags the broader market by anywhere from 5 to 12 percentage points.

As for the past two decades? It's not good. Have a look at the chart below to see what KO's chronic underperformance looks like on a brokerage statement.

Coca-Cola, S&amp;P 500 20-year total return on $1,000 investment

If you put $1,000 into Coca-Cola stock 20 years ago, it would be worth about $6,200 today, good for an annualized total return of 9.6%. The same amount invested in the S&P 500 would theoretically be worth about $7,900 today.

Truly long-term shareholders have benefited from the ballast a consumer staples stock such as KO can provide in tougher markets, but as a less risky name, it also provided less reward.

The Street is bullish on KO at current levels. Of the 24 analysts covering the stock surveyed by S&P Global Market Intelligence, 13 rate it at Strong Buy, seven say Buy and four call it a Hold. That works out to a consensus recommendation of Buy, with high conviction.

Speaking for the bulls, Jefferies analyst Kaumil Gajrawala calls KO a "standout" among industry peers.

"The business is strong and getting stronger," says Gajrawala, who rates shares at Buy. "Volumes are healthy. Coke's mix and pricing dynamic is one of the best in our space, and free cash flow is set to accelerate."

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Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.