Warren Buffett's Secret Dividend Stock Has Never Cut Its Payout

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If you’ve watched Berkshire Hathaway’s annual meetings, you’ll see that Warren Buffett keeps a can of Coca-Cola (NYSE:KO) by the side. It is one of his pillar holdings, but it is rarely mentioned or discussed during the Q&A session. Investors often ask him about other dividend stocks, macros, or flashier growth stocks. However, the can sitting near Buffett year after year is a good clue that this is a forever stock for him.

And if you are looking for a solid holding that never cuts its dividends, you should make this a forever stock for your portfolio, too.

Berkshire Hathaway started buying shares of Coca-Cola. Over the next six years, Buffett spent about $1.3 billion and stopped adding once the position reached 400 million shares. He has not bought another share since 1994, and he has never sold a single one. Today, those shares are worth close to $28.64 billion, or 11.07% of his portfolio.

Coca-Cola (KO) never cuts its dividends

The biggest advantage of owning KO stock is most certainly the dividends. It doesn’t pay a remarkably high yield, but it is enough to outpace inflation and compound your portfolio if you reinvest.

KO stock currently yields 2.9% and it has 63 consecutive years of dividend increases, making it a Dividend King. The forward payout ratio is at 63.91%, so there’s almost no risk of a dividend cut anytime soon.

The 2.9% dividend yield plus the 13.75% year-to-date gain gives you a 16.65% total return so far this year. That’s well above the S&P 500’s total return for the year. Of course, this doesn’t mean you’ll consistently outperform the broader market with KO stock, but the reliability of its dividends and the stock itself can let you breeze through market storms and come out on top.

Why Coca-Cola is so reliable

When it comes to sugar-sweetened beverages (SSBs), “…68% of adults living in the Northeast, 67% of adults living in the South, 61% of adults living in the West, and 59% of adults living in the Midwest reported drinking SSBs one or more times per day.” Soft drinks rank as the single most-ordered beverage. In fact, it even outpaces water.

You’d expect Coca-Cola to take a hit in the GLP-1 era, but that also failed to dent the company’s moat. Sales are only rising worldwide. Per Coca-Cola itself, there’s little impact from GLP-1 drugs.

It’s hard to shake off a habit like Coca-Cola, and this company’s financials are accordingly quite resilient. Soda also constitutes a fraction of what people spend on their meals, and the sugar ends up rewarding them even more than the meal they are splurging on. Thus, KO stock has been able to stay ahead of the market during downturns and recessions.

The fountain keeps flowing

Nothing suggests that Coca-Cola has maxed out its growth potential just yet. It has a 3-year revenue growth rate of 6.9% annually, along with a 3-year EPS growth rate (minus non-recurring items) at 7.5% annually. Analysts see revenue growth at around 4.5% in the coming years, with EPS growth at 6.19% annually. The bottom line could perform even better if interest rate cuts kick in as expected.

Q2 2025 organic revenue grew 5% year-over-year, with Latin America having the strongest organic revenue growth at 13%. Management sees 5% to 6% full-year organic revenue growth and $9.5 billion in free cash flow.

This is a solid buy-and-hold dividend stock that will let you sleep well at night in this environment, especially as Coca-Cola remains less exposed to tariffs.

Analysts’ average price target for KO stock is $80 in the next 12 months, up 13.5%.

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