Meet the Dividend Stock That Warren Buffett Backed for Decades. Here's Why It Just Hit an All-Time High Under Greg Abel.
Key Points
Buffett has praised Coca-Cola as an "inevitable," meaning that people will always buy it, and it will always dominate its industry.
It has always focused on large-scale marketing campaigns to strengthen its relationship with its customers.
It has raised its dividend annually for 64 years, resulting in a large annual payout for Berkshire Hathaway.
Warren Buffett has been clear about his favorite stocks in recent years. He keeps returning to the same handful of names, three of which were Berkshire Hathaway's (NYSE: BRKA)(NYSE: BRKB) largest positions under his tenure.
One of them is the equity portfolio's longest-held position, and Greg Abel is holding on to it as he leads the company into the artificial intelligence (AI) era: Coca-Cola (NYSE: KO). (For the curious, the other two large positions are Apple and American Express, and the fourth that has been mentioned at times is Moody's.)
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Why Coca-Cola is foundational
Let's go back to the very first time Buffett bought Coca-Cola stock, in 1988, when he explained why he wants to own it. For outstanding businesses with outstanding management, he wrote, "our favorite holding period is forever."
Image source: The Motley Fool.
What makes the business so outstanding?
In 1996, Buffett called Coca-Cola, along with Gillette, one of the "inevitables." He said, "No sensible observer [...] questions that Coke and Gillette will dominate." He explained that as far back as 1896, when Coca-Cola was all of a decade old, it already had high public opinion and a national sales force that kept it at the top of consumers' minds.
Then there's the fantastic dividend. Coca-Cola is a Dividend King, and it has raised its dividend annually for the past 64 years.
Altogether, Berkshire purchased $1.3 billion worth of Coca-Cola stock from 1988 through 1994, and it has never sold a share. Today, the position is worth nearly $35 billion, not including the annual dividends that Berkshire receives. In 2026 alone, that's scheduled to be $848 million.
Why Coca-Cola just hit an all-time high
These are the same reasons Coca-Cola is so reliable today, and likely the same reasons that the stock just hit an all-time high. While the S&P 500 is up a respectable 14% year to date, Coca-Cola stock is crushing it, up 26%. That's not too bad for a company that's over a century old.
The market is loving the company's strong performance despite inflation and a tough operating environment. It still has a robust marketing system that put it in front of customers' faces during the summer's World Cup, and its healthy relationship with its fans resulted in a 6% year-over-year increase in organic revenue in the second quarter (organic revenue strips out acquisitions, divestitures, and currency swings).
Investors know that they can count on Coca-Cola even when the market is challenging. It's a dividend payer that can reward patient retail investors, even if nobody buying today starts from Berkshire's low cost basis.
American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express and Apple. The Motley Fool has positions in and recommends American Express, Apple, Berkshire Hathaway, and Moody's. The Motley Fool has a disclosure policy.