Prediction: Coca-Cola Stock Will Soar Over the Next 5 Years. Here's 1 Reason Why.

Lumped in with three dozen other members of the struggling Consumer Staples Sector Select ETF (XLP 0.67%), shares of Coca-Cola (KO 1.06%) have quietly side-stepped the group's market-trailing defensive slump and managed to deliver a respectable 12% year-to-date return.

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NYSE: KO

Coca-Cola

Today's Change

(-1.06%) $-0.74

Current Price

$69.81

Key Data Points

Market Cap

$303B

Day's Range

$69.69 - $70.24

52wk Range

$60.62 - $74.38

Volume

197K

Avg Vol

16M

Gross Margin

61.55%

Dividend Yield

0.03%

Even though the Atlanta-based beverage giant's performance still lags the S&P 500's 15% gain, Coca-Cola's relative resilience -- it's one of only 10 staples sector stocks up more than 10% this year -- is a testament to its enviable status as a blue chip, long-term, core holding.

Looking at its present size and state -- a market cap of almost $300 billion, annual earnings per share (EPS) pegged to rise 3.7% to $2.99, driven by 2.9% sales growth to $48.2 billion -- Coke's low-single-digit trajectory isn't especially thrilling.

Image source: Getty Images.

The benefits of boring

However, what keeps investors very interested -- including 10% stakeholder Warren Buffett's Berkshire Hathaway (BRK.A 0.51%) (BRK.B 0.55%) -- is the predictability of Coca-Cola's performance combined with its steady dividend growth.

On the former front, Koyfin data shows Coca-Cola hasn't missed a sales or EPS estimate for at least five years. On the latter point, Coca-Cola is on the Dividend Kings list, having increased its payout for 63 consecutive years. At 2.9%, Coke's dividend yield is slightly above average for the staples sector and the broader markets, and has grown at a 4.5% annualized rate over the past 10 years.

The combination of Coke's slow and steady earnings growth and consistently rising income delivers a compelling total return story. Analysts currently see the beverage company adding over $1 billion of additional net income a year that would lift adjusted EPS by about 40% from $2.99 in 2025 to an estimated $4.26 in 2030.

Using the midpoint of Coca-Cola's 10-year P/E ratio range (22x), that implies a 2030 share price of around $93, plus over $11 of cumulative dividend income, for an estimated -- and respectable -- five-year total return of about 55%.