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How Coke Stock Rewards Investors

By Anders Bylund - Apr 3, 2013 at 2:03PM

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If you're looking for a safe investment that's sure to beat the market in the long run, Coke is your stock.

Some investors are looking for outsize returns in the short term. Others prefer generous dividend checks. True Fools go for a combination of deep value and nigh-on guaranteed long-term performance. If you're in either of the last two categories, Coke just might be your favorite stock.

Coca-Cola (NYSE: KO) runs an amazingly boring, predictable, and profitable business that performs well in good times and bad. The stock has absolutely crushed its peers on the Dow Jones Industrial Average (DJINDICES: ^DJI) over the last five years, whether or not you reinvested dividends along the way. That being said, one of Coke's main attractions is its dividend, which just about doubled its stock returns across this period:

KO Chart

KO data by YCharts.

What if you stretch your investing horizon to decades, rather than a few measly years? The performance delta only grows larger:

KO Total Return Price Chart

KO Total Return Price data by YCharts.

And this is where the magic happens. Coke's unimpeachable brand and flawless execution helped the company more than double sales in the last 10 years. Free cash flow jumped 104%, allowing management to increase dividend payments by 154%. Coke stock followed suit with a 165% dividend-adjusted climb.

KO Total Return Price Chart

KO Total Return Price data by YCharts.

Coke shares are bound to perform, come hell or high water. Past performance is no guarantee of future returns, of course, but the Atlanta-based beverage giant comes close to that unreachable ideal.

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