There's some investing wisdom that can only come from experience. I know, because I've lived it. While I didn't do too badly as a new investor, after being in the market -- and in the business -- for nearly three decades, I know I'd do things very differently if I were just starting today. I'd speculate less on splashy growth stocks and aim for more recurring income, largely through dividends.
And there's one dividend name in particular I'd make a point of making a foundational holding. That's beverage company Coca-Cola (KO -0.52%). Here's why.
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Coca-Cola's business is beautifully boring
Exciting? No. In fact, it's predictable to the point of being boring. It's also anything but a red-hot growth stock. Coca-Cola's most marketable feature is its dividend, and with a forward-looking dividend yield of only 2.5%, it's not even a particularly thrilling dividend payer.
Just don't dismiss the potential of a steady income that grows over time. If you can be patient enough to stick with a boring income stock long enough, it becomes a growth investment, or at least funds your portfolio's long-term growth.
That's certainly been the case with Coca-Cola over the past 20 years, anyway. The stock's price has appreciated 285% since September 2006. Had you reinvested its dividend payments dished out during this stretch in more shares of KO, your total net return would have more than doubled for this two-decade time frame.
Data by YCharts.
That's the power of persistent dividends.
That being said, just because Coca-Cola's net return (with reinvested dividends) is impressive doesn't necessarily mean I'd buy more shares as these payments are made. I might. But I'd also be willing to accept these payments in cash and keep the money handy for other opportunities as they arise.
The longer you stick with it, the more there is of it, too. For perspective, the quarterly dividend of $0.31 Coca-Cola was paying 20 years ago has since grown to $0.51. Put in more practical terms, a $10,000 investment in KO back in 2006 that produced $277 in annual dividend income has since grown to nearly $19,300.
But this same position now yields more than $450 per year in dividends. That's roughly $7,300 worth of investment income generated during these 20 years on that initial investment, which you can put to work in any number of ways.
The kicker: Coca-Cola's dividend hasn't just grown nicely for the last 20 years. The beverage powerhouse has now raised its annual payout in each of the past 64 years, making it a Dividend King, with no end to the streak in sight.
The other kicker: Coca-Cola is much less nerve-racking to stick with when other growth investments are being tossed around by a volatile market.
NYSE: KO
Key Data Points
Built to perform in perpetuity
Obviously, Coca-Cola isn't the only such name that could serve as a strong foundation for a brand-new investor's inaugural portfolio. Other dividend stocks bring something similar to the table.
This stock is one I feel comfortable counting on for the indefinite future, though, simply because it offers a product that's perpetually marketable in any economic environment. There aren't too many other names out there that can say the same.
