How Coca-Cola Has Raised Its Dividend for 61 Years 🥤

Mix together a strong brand, solid consumer demand, the benefits of scale, and a willingness to innovate, and you get a company with incredible long-term staying power.

For many shareholders, perhaps the only feeling better than receiving a dividend is receiving one that regularly increases over time. Making a one-time investment to buy an income stream that grows throughout the years can be an incredibly powerful tool to help people build wealth to help improve their lives.


It’s rare to find a company capable of regularly boosting its payout each year for decades, as very few businesses have managed to pull it off. With 61 consecutive years of increased dividends under its belt , Coca-Cola (NYSE: KO) has one of the longest active streaks out there. Thanks to that amazing success, its long-term shareholders have been rewarded handsomely for the risks they’ve taken by buying the company’s stock.

This raises a key question: How has Coca-Cola managed to pull that off? After all, every investor cares about the future. Understanding a bit more about how the company delivered that track record can  a long way towards helping investors see whether that’s a trend that can continue.

Coke’s not-so-secret sauce
Ultimately, Coca-Cola relies on a combination of popular -- and proprietary  -- beverage formulas, delivered at scale, to a global audience. That combination of factors, combined with consistent research and development to help drive whatever comes next, has enabled the company to thrive for decades.

Each of those items is important to Coca-Cola. Its namesake soda and the consumer demand for it are the economic engines that propel its business. As the company found out in the 1980s when it tried to replace its classic flavor with New Coke,  its brand has such incredible power that many people would rather have it than sodas where they prefer the taste . That’s an incredible foundation for a strong business -- as long as the company can keep that level of brand power, of course.

Yet getting that strong brand into the hands of people around the world -- its scale -- is what gives Coca-Cola the financial heft to continually pay its shareholders those dividends. A big part of how its scale benefits it comes from its bottling network. Coca-Cola centrally produces and ships out its sodas in concentrated form, then ships those concentrates to local bottlers for final production and distribution. 

That system allows it to keep tighter control over its proprietary formula and lower its total costs of operating. After all, water -- the biggest ingredient added by its bottlers -- is readily available around the globe, and it is way more expensive to ship the finished sodas with all that water than just the concentrate. By using local bottlers like that, Coca-Cola can keep its transportation costs in control, enabling it to profit while keeping prices at levels that people are willing to pay.

Yet as awesome as that scale is, the reality is that Coca-Cola launched its failed New Coke variant because it operates in a competitive environment. Other companies operate in the same industry, and if Coca-Cola can’t keep pace with shifts in consumer preferences, it won’t remain relevant for very long. That’s where its research and development comes in handy -- offering up new variants of Coke as well as other types of beverages over time. Not all of those brands will ultimately work out -- the company did discontinue around 200 brands during COVID  -- but those that do can help the company continue to grow and pay those dividends.

What do you get for your money?
Today’s investors in Coca-Cola get a solid yield of around 2.9%.  With a dividend payout ratio of around 75% of its earnings,  investors shouldn’t expect very rapid payment increases from here. Instead, it might be able to continue to raise its dividends about in line with its earnings -- which analysts expect will rise by around 6% annualized over the next five years. 

A decent current yield, modest growth prospects, and one of the strongest brands on the planet  add up to a company that certainly looks like it has longer term staying power. Coca-Cola may not be the fastest growing business out there, but it certainly earned that 61 year track record of rising dividends. And importantly for today’s investors, it still has that great foundation in place that can help it keep that streak alive.

In our latest EasyResearch feature, we have the awesome Chuck Saletta  (contributor to Motley Fool) sharing some fantastic insights on Coca-Cola.  Just to keep you in the loop, at the time of publication, Chuck didn't own any shares of Coca-Cola.

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Sources –  Coca-Cola Company, Britannica, Food and Wine, Fast Company, Yahoo Finance, Kantar

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