There is no one-size-fits-all blueprint to making money on Wall Street -- and that’s a good thing. With thousands of publicly traded companies and north of 3,000 exchange-traded funds (ETFs) to choose from, there’s likely to be one or more securities that can help growth your wealth.
However, select investment strategies have historically given investors a leg up in the return column. Buying and holding high-quality dividends stocks is a perfect example.
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Dividend stocks have knocked it out of the park for investors over the long run
It shouldn’t come as much of a surprise that public companies paying a regular dividend to their shareholders outperform. These are companies that are almost always recurringly profitable and time-tested. In other words, investors aren’t going to sleep at night worrying about whether or not these companies will be on solid ground when they wake up in the morning.
What is shocking is the magnitude by which dividend stocks have outperformed non-payers over the long run. In The Power of Dividends: Past, Present, and Future, Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered a 9.17% annualized return between 1973 and 2023. In comparison, non-payers generated a more modest 4.27% annualized return over the same half-century span.
But great dividend stocks don’t grow on trees. Though well over 1,000 securities (stocks and ETFs) pay their investors a dividend, fewer than five dozen public companies are part of a select group of stocks, known as Dividend Kings, which have increased their base annual payout for at least 50 consecutive years.
One of these special stocks, which has increased in value by approximately 1,423,200% since its initial public offering (IPO), is set to add to its history-making dividend streak in just two weeks.
Wall Street’s most-chosen consumer brand is about to make history
There are dividend stocks, and then there’s the most-chosen consumer staples brand on the planet, Coca-Cola (KO -0.16%).
When Coke debuted as a public company listed on the New York Stock Exchange on Sept. 5, 1919, it priced its shares at $40. Over the span of more than 105 years, its shares have undergone 10 forward stock splits, ranging from 2-for-1 to 4-for-1, as well as a 1-for-1 stock dividend in April 1927. Inclusive of these splits (but not including dividends), Coca-Cola stock has increased in value by approximately 711,606% since its IPO, as of the closing bell on Jan. 22.
While these gains are eye-popping, the company’s dividend streak is, arguably, even more impressive.
KO Dividend data by YCharts.
In February 2024, just two days after releasing its fourth-quarter and full-year operating results, Coca-Cola’s board announced it would raise the company’s quarterly payout from $0.46 to $0.485 per share. This marked the 62nd consecutive year that Coke’s shareholders had witnessed their base annual payout climb.
To put this into context, among the thousands of publicly traded companies, just 54 have raised their base annual payout for at least 50 consecutive years. Among these 54, only eight offer a longer streak of consecutive dividend increases than Coca-Cola.
Just over two weeks from today, on Feb. 11, it’ll report its fourth-quarter and full-year operating results from 2024. With the company’s board clear about its intentions of increasing dividends for shareholders, Coca-Cola is expected (during the week of Feb. 10) to boost its payout for a 63rd straight year.
Image source: Coca-Cola.
Coca-Cola’s foundation is built atop sustainable competitive advantages
Delivering an expected 63-year dividend-increase streak isn’t something that happens by accident. It’s a reflection of Coca-Cola’s foundational and sustainable competitive advantages.
One of these key competitive edges is its geographic diversity. With the exception of Cuba, North Korea, and Russia (the latter has to do with its invasion of Ukraine in 2022), Coca-Cola has operations in every country. This means being able to take advantage of higher growth opportunities in emerging markets that can move the organic growth needle. It also leads to predictable and sustainable operating cash flow in developed countries.
Selling a basic need good doesn’t hurt, either. Consumers are going to purchase Coke’s products no matter how well or poorly the U.S. and global economy are performing. According to Kantar in its annual “Brand Footprint” report, Coca-Cola was the world’s most-purchased brand for a 12th consecutive year in 2023.
But the true unsung hero for Coca-Cola just might be its marketing team. The ability to connect and engage with its customers across generational gaps is a feat few consumer-facing companies have been able to achieve over long periods. The company’s marketing team is leaning on artificial intelligence (AI) solutions and social media to connect with younger audiences, and has relied on well-known brand ambassadors and even its holiday tie-ins to engage mature consumers.
Lastly, strong brand recognition (especially when selling consumer staples) almost always leads to meaningful pricing power. The effects of inflation rarely make a dent into Coca-Cola’s armor.
With these sustainable competitive advantages firmly in place, and the company’s payout ratio hovering around 65% for 2025 (based on Wall Street’s consensus earnings per share estimates), there’s plenty of runway for Coca-Cola’s historic dividend-increase streak to continue.
