Folks often turn to Warren Buffett-led Berkshire Hathaway (BRK.A 0.59%) (BRK.B 0.53%) for investment ideas. And for good reason, as Berkshire Hathaway achieved a compound annual gain of 19.9% between 1965 and 2024 compared to 10.4% for the S&P 500 (^GSPC 0.40%)
But a lot has changed in the last few decades, as the most valuable companies today are tech stocks like Microsoft, Nvidia, and Apple -- not big oil companies and industrials like in the past. Berkshire's bold bet on Apple stock showed that it is willing to adapt with the times and adjust its portfolio to include more tech stocks. However, Berkshire has also been a net seller of public equities, growing its position in cash, cash equivalents, and marketable securities to record highs and focusing more on companies it controls rather than buying shares of public companies.
One position that has remained steadfast through all the changes is Coca-Cola (KO 0.48%). In fact, Berkshire hasn't sold any shares of Coke in over 25 years. Despite keeping its position unchanged, Berkshire has gradually owned a larger share of Coke thanks to the company's stock buybacks. Today, Coke is Berkshire's third-largest holding behind Apple and American Express.
Here's why Coca-Cola is crushing the S&P 500 in 2025 and why the dividend stock could still be worth buying in June.
Image source: Getty Images.
Coke continues to deliver on expectations
In February, Coke reported 2024 results and provided 2025 guidance of organic revenue growth of 5% to 6% and earnings per share (EPS) growth of 2% to 3%. The guidance wasn't great, but at least Coke was still expecting some growth while peers like PepsiCo continue to see intense strain on consumer spending and weakening pricing power.
However, market dynamics changed between early February and when Coke reported its first-quarter 2025 results in late April. Tariffs are affecting global supply chains -- and Coke is a global business with higher sales outside North America than within. However, Coke has a distributed and localized supply chain consisting of bottling partnerships that help Coke quickly adapt and pivot as needed.
Coke's strong beverage lineup -- with industry-leading brands across nonalcoholic beverage categories, including water, sparkling water, sports drinks, and juice, as well as health-conscious brands like Fairlife -- allows the company to cater to consumer preferences, which can vary based on geography.
In its latest quarter, Coke achieved a 6% increase in organic revenue, the high end of its long-term target range. Coke also notched a 1% increase in year-over-year EPS despite a 5% currency headwind. Coke's strong results and competitive advantages gave the company the confidence needed to reaffirm its full-year guidance on both organic revenue growth and EPS despite tariff risks, currency headwinds, and pressures on sales volume due to challenged consumer spending.
Coke can afford its growing payout
Coke's beverage lineup and ability to execute even during challenging periods make the company well positioned to steadily grow its dividend over time. In February, Coke raised its dividend by 5.2% to an annualized rate of $2.04 per share -- marking the 63rd consecutive year Coke boosted its payout.
Based on Coke's $2.88 in 2024 EPS and guidance for 2% to 3% EPS growth in 2025, Coke is on track for a payout ratio of about 69% -- which is decent for a reliable dividend-paying company with a fairly recession-resistant business model.
Coke's valuation is also reasonable, as $2.95 in 2025 EPS would imply a price-to-earnings ratio of 24.3 -- which is good for a rock-solid company in a non-cyclical industry.
A stock you can count on, no matter what the market is doing
Coke checks all the boxes for a reliable dividend stock to buy in June for passive income. Coke is outperforming the S&P 500 in 2025 because the company's results and guidance showcase tariff resilience and Coke's competitive advantages.
Coke has an impeccable track record of raising its dividend and generates plenty of earnings to afford the payout. Coke also has an attractive dividend yield of 2.8%, making it a good choice for retirees looking to supplement income.
Add it all up, and it's easy to see why Buffett has confidently held Coke for decades and why the company still has what it takes to serve a foundational role in Berkshire Hathaway's public equity portfolio.
