Berkshire Hathaway, led by Warren Buffett, holds a significant position in Coca-Cola. The company owns 400 million shares of the beverage giant, making it Berkshire’s fourth-largest holding and accounting for 8.4% of its portfolio. Based on Coca-Cola’s quarterly dividend payout of $0.48 per share, Berkshire Hathaway is set to receive $768 million in annual income from this investment alone.
This consistent income stream allows Buffett’s company to reinvest the capital into other parts of the conglomerate, potentially earning higher returns. Coca-Cola’s dividend yield currently stands at 3.1%, which is a solid return for investors. The company has increased its quarterly payout for 62 consecutive years, demonstrating management’s commitment to shareholders.
This year could mark the 63rd consecutive increase in the dividend. Founded in 1886, Coca-Cola’s success can be attributed to its strong brand presence.
Berkshire’s Coca-Cola dividend income
The company offers more than 200 different drink concepts in over 200 countries and territories, with 2.2 billion servings consumed per day. This global reach and consumer loyalty contribute to Coca-Cola’s pricing power and resilience to economic downturns. Despite unit volume declines in the last quarter, Coca-Cola benefited from favorable pricing trends.
The company’s profitability is evident in its ability to generate $7.6 billion of free cash flow from $35.5 billion in net operating revenue through the first three quarters of 2024, highlighting its strong margins. While Coca-Cola offers stability and a reliable dividend, investors seeking to outperform the stock market may want to consider other options. Over the past decade, Coca-Cola has produced a total return of just 101%, while broader market indices would have more than tripled an investor’s money.
The mature nature of the beverage industry limits Coca-Cola’s growth prospects, and its fully valued price-to-earnings (P/E) ratio of 25.8 contributes to the challenges in exceeding market returns. In summary, Coca-Cola provides Berkshire Hathaway with a substantial and consistent income stream through its dividend payouts. However, individual investors looking for higher growth and market-beating returns may want to explore other investment opportunities.
