If the market runs dry, you're going to want a liquid investment. And if there's one thing that Coca-Cola (KO +0.24%) knows well, it's liquid. Beyond its namesake soft drinks, Coca-Cola covers a lot of beverage stock categories, including water, coffee, tea, sports drinks, juice, and dairy products.
Coca-Cola's flagship beverage is bubbly, and some may argue that the same can be said about today's market. A pullback is inevitable, even if it takes weeks, months, or years to happen. So why should you buy shares of the pop star if you're worried about a bear market? Stay close. I have a list of reasons I think you should. Crack open a can -- or bottle -- and let's dive right in.
NYSE: KO
Key Data Points
1. It's a low-cost indulgence
Coca-Cola is considered a defensive consumer-staples giant. While it does provide a premium-priced product -- at least relative to private-label store-brand cola or tap water -- it's a reasonably priced indulgence. It's considered an "affordable luxury" in the eyes of economists.
When times are tough, a sugary soda provides a boost and temporary escapism. Most of Coca-Cola's product portfolio consists of beverages that are priced for most budgets, so it's not a surprise to see the company itself prove resilient during the market's darkest stretches. The Great Recession -- the longest recession in the U.S. since World War II -- officially lasted through all of 2008 and the first half of 2009. How did Coca-Cola hold up? Well, its revenue rose 11% in 2008. It did post a 3% top-line decline in 2009, but its case volume still grew by 3% that year. In short, when it comes to weathering an economic setback, investing in Coca-Cola is it.
2. Dividend checks keep coming and growing
A safe harbor when stocks are getting rattled is a quarterly dividend check. The payouts are welcome bursts of incremental income in a sea of downticks, and Coca-Cola is more than just a dividend stock. The beverage bellwether is a Dividend King, jacking up its distribution rate for 63 consecutive years.
Do you know how many bear markets have growled in that time? There have been at least 10 bear markets over the past six decades in which stocks plummeted by more than 20%. Coca-Cola kept boosting its dividend annually through all of them.
Even better, as a stock drops, the yield for new investments grows larger. Coca-Cola's 2.9% yield would jump to 3.5% if the shares slipped 20%. This is before including the dividend itself that should continue to grow with every passing year.
3. Having a low beta is a good thing in a downturn
Suggesting that Coca-Cola stock would decline 20% in a bear market -- as I did in illustrating the power of rising dividends in that last point -- isn't fair. The lord of liquidity should hold up better than the overall market averages in a downturn.
Coca-Cola is a low-beta stock. Its five-year beta is a mere 0.42, suggesting that the shares have 42% of the volatility of the overall market. Its one-year beta is an even lower 0.19.
4. It's steady like a beating drum
Coca-Cola may not seem cheap, given its historically modest growth. It's trading for 22 times forward earnings. And don't be surprised if analysts keep nudging their profit targets higher. Coca-Cola routinely lands ahead of Wall Street expectations on the bottom line. Just check out how analysts have undershot Coca-Cola's reality since the start of last year.
| Period | EPS Estimate | Actual EPS | Surprise |
|---|---|---|---|
| Q1 2024 | $0.70 | $0.72 | 3% |
| Q2 2024 | $0.81 | $0.84 | 4% |
| Q3 2024 | $0.75 | $0.77 | 3% |
| Q4 2024 | $0.52 | $0.55 | 6% |
| Q1 2025 | $0.72 | $0.73 | 2% |
| Q2 2025 | $0.84 | $0.87 | 4% |
| Q3 2025 | $0.78 | $0.82 | 5% |
Data source: Yahoo! Finance. EPS = earnings per share (adjusted).
From betas to beats, it's hard to resist the allure of Coca-Cola. Its historically low volatility is made for bear markets. It also has some impressive streaks of bottom-line beats and dividend increases. Toss in the recession-resistant nature of its global product offerings, and you have a stock built in a lab -- or a pharmacy soda fountain in Atlanta -- to weather the next bear market as well as it has the previous market setbacks.
