Sports fans are familiar with the idea of a dual-threat quarterback who can make plays with his arm or on the ground with his legs, or the triple-threat in basketball, where the player can pass, shoot, or drive to the rim. The key to both of these ideas is versatility.
This same concept can be imported to your portfolio. Here's how a top blue-chip stock like Coca-Cola (KO) can be a "triple threat" -- playing three different roles for your portfolio: defensive stock, dividend stock, and growth stock.
Image source: Getty Images.
A defensive stalwart
Defensive stocks are those that help investors preserve their portfolio value in a downturn thanks to factors like steady earnings, reasonable valuations, and reliable dividends. These are often consumer staple giants that sell products people buy on a frequent basis, so they aren't as prone to cyclicality as stocks such as industrials or homebuilders. While many consumer staple stocks have fallen along with the broader market this year, Coca-Cola has proven it is worthy of the "defensive" label with a 2.6% gain year to date.
While a 2.6% gain might not sound like much to write home about, keep in mind that this performance trounces the broader market, where the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite are down 10.2%, 18.7%, and 29.9% year to date, respectively. Even the Consumer Staples Select Sector SPDR ETF is down 5% year to date (note that Coca-Cola is the ETF's second- largest holding, so Coca-Cola's year-to-date gain is boosting the overall performance of the ETF).
Not only did Coca-Cola preserve the capital of its shareholders, it also gave their portfolios a slight increase in a year when the major indices struggled mightily. Coca-Cola is able to achieve this because it sells in-demand products that people buy habitually, and it has the pricing power to raise prices when needed.
But there's a lot more to Coca-Cola than just playing defense.
A time-tested dividend stock
Being a defensive stock often goes hand-in-hand with being a dividend stock, and Coca-Cola serves both roles. Shares of Coca-Cola currently yield a market-beating 2.9%, and the company has paid out nearly $70 billion in dividends to shareholders since 2010. For perspective, that's more than the entire market capitalization of competitor Keurig Dr Pepper.
After increasing its quarterly payout by 5% from $0.42 per share to $0.44 in February of 2022, this Dividend King has now increased its annual dividend payout for 60 years in a row. This enviable track record is a testament to Coca-Cola's commitment to shareholder returns, and only a handful of other companies in the public market come close to this 60-year streak.
A global growth stock
Just because Coca-Cola is a defensive, dividend-paying stock, that doesn't mean that it can't play some offense too. In fact, shares of a consumer staple giant like Coca-Cola are a good way to gain exposure to global GDP and population growth. Additionally, Coca-Cola is growing its top line by both exercising pricing power where prudent and driving unit volume. During the most recent quarter, Coca-Cola rode this winning combination to 16% organic revenue growth year over year, an impressive number for a 130-year-old mega-cap company.
While the company and its namesake Coca-Cola product have been around for a long time, Coca-Cola keeps things fresh and continues growing because it is always innovating, iterating on its product lineup, and acquiring new brands. For example, during the most recent quarter, Coke Zero Sugar grew 11% year over year, outpacing the growth of Coke itself.
Recent collaborations with alcoholic beverage maker Molson Coors Beverage Company have also been hits, with Topo Chico Hard Seltzer becoming the fastest-growing hard seltzer over the past year and Simply Spiked Lemonade becoming the fastest-growing new flavored alcohol beverage, according to data from IRI.
Coca-Cola is an all-weather buy
Coca-Cola is a stock that can do it all for your portfolio -- help you preserve capital during a down market, increase your passive income with a growing dividend, and give you more growth than it gets credit for these days. This multi-faceted strength makes Coca-Cola the perfect buy for all seasons, whether it's a challenging market environment like we are navigating through currently, or the next bull market that emerges from the downturn.
