In This Article:
Coca-Cola (NYSE: KO) stock has underperformed the S&P 500 for years, except for some key moments when investors flocked to its stock amid market turmoil. Still, Warren Buffett has touted it as an incredible company and has demonstrated how Berkshire Hathaway has used Coke's famous dividend to its advantage.
One of those key moments is now, and investors can see Buffett's wisdom in play. As the S&P 500 continues to flounder, down 8% this year, Coca-Cola stock is up 19%.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
But it's more than the regular reasons why Coca-Cola is a secure stock worth owning in any environment. Investors are trying to make decisions today based on how they think tariffs are going to impact company performance, and Coca-Cola has a tariff-resilient model that may even benefit from the new tariffs. Here's why.
Why Buffett loves Coca-Cola
Berkshire Hathaway first bought Coca-Cola stock in 1988, making it the company's longest-held equity position. It bought $1.3 billion worth over seven years, and today, it's worth more than $29 billion, accounting for 10.7% of the total equity portfolio.
But that doesn't account for what it gets from the dividend, which was $704 million in 2022. Berkshire Hathaway uses that money to fund other ventures in its vast holdings, making it a very lucrative position. He said in 2022 that the dividend was "highly likely" to keep growing, and he used this as an example to demonstrate that "over time, it takes just a few winners to work wonders."
Buffett made his famous quote about holding a stock forever in the 1989 Berkshire Hathaway shareholder's letter, talking about this purchase: "We expect to hold these securities for a long time," he said. "In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever." Buffett has called Coke one of the "best companies in the world" and a "really outstanding business" in addition to praising it in many ways over the years.
How tariffs play into the investing thesis today
Tariffs do not affect every public company in the same way, as they have suppliers and operational bases in countries across the world. As a global company, you might imagine that Coca-Cola would be highly affected by the new tariff program, but it's just the opposite.
In the fourth-quarter earnings update, CEO James Quincey addressed the potential impact of tariffs on Coke's business, as it was just being spoken about as a possibility at that time. Tariffs on aluminum, which affect canned products, were some of the major changes. He explained that the company has hedging programs in place to manage supply in general, shielding it from a significant impact, and that it has an equation for bringing all the operational pieces together to manage smoothly.