Year to date, the Nasdaq Composite is outperforming the S&P 500 and the Dow Jones Industrial Average. So you would probably assume that “Magnificent Seven” stocks Nvidia, Alphabet, Apple, Microsoft, Amazon, Meta Platforms, and Tesla would be crushing a stodgy, dividend-paying stalwart like Dow component Coca-Cola (KO 0.43%).
Yet, that’s hardly the case. So far this year, Coca-Cola has been outperforming every Magnificent Seven stock. Here’s why Coke shares are on the rise — and whether the stock is still a buy around an all-time high.
Image source: Getty Images.
Coke’s solid quarter
Cyclical tailwinds can buoy even mediocre-performing companies that are at the right place at the right time. But long-term investors prefer businesses that deliver solid results even during challenging periods. Companies that can perform even in sub-optimal operating environments are the ones that can compound over years or even decades. And Coca-Cola continues to prove why it fits that mold.
In the first quarter of its fiscal 2026 (ended April 3) Coke reported a 12% increase in net revenue, a 12% increase in comparable currency-neutral net operating income, and a 10% increase in organic revenue. Coke realized a 2% increase in price/mix and a 3% increase in unit case volumes — meaning that price increases didn’t negatively impact demand.
Low single-digit price and volume increases may not sound like much to cheer about — but in this operating environment, it most certainly is.
Coca-Cola is much more than its flagship product
Consumer staples companies are struggling to pass along higher input costs to consumers, often having to either lower prices to drive volume or increase prices and sell fewer products. Coke’s strong results are a testament to the continued strength of its core brands, especially Coca-Cola Zero Sugar and Diet Coke. In fiscal 2025, its trademark brands accounted for 42% of U.S. unit case volume and 48% of non-U.S. unit case volume — a testament to Coke’s international brand recognition and the success of flavors like Cherry Coke, Coca-Cola Zero Sugar, and Diet Coke.
Trademark Coca-Cola alone would likely yield decent results for Coke. But what makes the company a top-tier option in the consumer staples sector is its elite portfolio of brands, developed and acquired, that complement Trademark Coca-Cola. Coke called out several of these brands on its April 28 earnings call, including a double-digit volume increase for Fuze Tea and volume increases in Fresca, Bodyarmor, Powerade, Dasani, Smartwater, and Minute Maid.
Topo Chico has been one of Coke’s fastest-growing brands since it was acquired in 2017, but production has been constrained in North America due to facility upgrades and issues with the wells where the beverage is produced in Monterrey, Mexico. Coke’s diverse beverage portfolio and geographic diversification protect it from brand-specific and/or regional slowdowns. About 60% of Coke’s operating revenue is international, which is helping cushion Coke from weakness in U.S. consumer spending.
Today’s Change
(-0.43%) $-0.34
Current Price
$78.42
Key Data Points
Market Cap
$339B
Day’s Range
$78.42 – $79.64
52wk Range
$65.35 – $82.00
Volume
271K
Avg Vol
17M
Gross Margin
61.90%
Dividend Yield
2.62%
Coke’s recipe for high margins
In its latest quarter, Coke reported a 63% gross margin, 35% operating margin, and a 31.5% net profit margin. This means that Coke is converting over $0.31 of every dollar in sales into after-tax net income attributable to shareholders.
Coke achieves these sky-high margins largely due to its exceptional marketing, brand portfolio, and global network of bottling partners, which purchase concentrates, beverage bases, and syrups from Coca-Cola. These partners manufacture, package, merchandise, and distribute the final branded beverages. It’s a win for both parties, as Coke puts less capital to work and takes on lower risk, and the bottling partners benefit from selling a recognizable brand.
A reliable dividend stock at a premium price
Coca-Cola is one of just 57 companies that have raised their dividends for at least 50 consecutive years — known as Dividend Kings. And of those 57 Dividend Kings, Coke is one of just 18 that have raised their payouts for at least 60 consecutive years.
Thanks to its steady earnings growth and high margins, Coke doesn’t rely on debt or depleting cash from its balance sheet to support its dividend growth. In addition to having one of the most reliable dividends, Coke also has a fairly high dividend yield of 2.7% — which is significantly higher than the S&P 500 dividend yield of just 1.1%.
Coke is a well-run, industry-leading company that continues to prove why it’s a foundational dividend stock to build a portfolio around. However, Coke stock isn’t cheap by any means — fetching a 25.8 price-to-earnings (P/E) ratio and 24.4 forward P/E. That’s more expensive than the S&P 500 forward P/E of 20.9, but Coke has historically traded at a premium, with a 10-year median P/E of 27.7.
Coke is still a solid buy
Coke commands a premium valuation and is outperforming top growth stocks because the company is delivering exactly what long-term shareholders are looking for: high margins and steady earnings growth, no matter the operating environment.
As an established beverage company, Coke’s industry and size make it virtually incapable of achieving the high-octane growth rate of leading artificial intelligence (AI) stocks. But Coke can act as a stabilizer that keeps a diversified portfolio even-keeled, no matter the market cycle.
Consider that Coke produced a 10.6% total return in 2022, the same year the S&P 500 notched a negative 18.1% total return. Coke also held up well during the April 2025 tariff-induced stock market sell-off, the brief correction that occurred earlier this year.
Coke may not appeal to risk-tolerant investors, but it’s well worth the premium price for investors who want to stay invested in the market, collect passive income, and limit volatility.
