The Ultimate Dividend Growth Stock to Buy With $1,000 Right Now.

There is a large swath of investors out there that don’t care much about capital appreciation. It’s definitely hard to ignore Nvidia, for example, whose share price has rocketed 1,020% higher in the past five years (as of Sept. 30). But some market participants have the goal of designing a portfolio that generates passive income.

There are a lot of these kinds of businesses to choose from. However, one industry-leading company stands out. It’s even a top holding in Berkshire Hathaway’s portfolio.

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Continue reading to learn about the ultimate dividend growth stock. You might consider buying shares with $1,000 right now.

Closing in on 65 years

In February, Coca-Cola‘s (NYSE: KO) board of directors approved a $0.53 quarterly dividend. This marked the 64th straight year that the dividend payout was increased. Companies with at least 50 years of such moves qualify as Dividend Kings. Coca-Cola is ready to make it 65 years in early 2027.

The dividend yield right now is 2.45%. That’s more than double the S&P 500 index’s 1.06% yield. In the past decade, Coca-Cola’s quarterly dividend has increased by 51%. Assuming this pace of growth repeats itself in the coming 10 years, it means that you’d be earning 3.7% on that initial $1,000 investment in 2036.

Berkshire Hathaway understands just how much patience pays off. The conglomerate’s cost basis on its Coca-Cola position is $1.3 billion. Based on the 400 million shares that it owns, it collects $848 million in annualized income today, equal to 65% of the starting capital sum.

In addition to benefiting from dividend growth, which results in a steadily rising passive income stream, investors have also profited from capital appreciation. To be clear, though, Coca-Cola isn’t surging like Nvidia or many other artificial intelligence companies. However, the beverage stock has climbed 106% in the past 10 years. This has lagged the overall market, but it provides an additional source of return for your portfolio.

Durability is the signature attribute

A dividend stream is only as secure as the quality of the company backing it. Investors familiar with Coca-Cola’s operations know there isn’t much to worry about in this regard. This is an extremely high-quality business.

Stable demand is an attractive characteristic. Coca-Cola sells low-ticket beverages, products that consumers will still buy during adverse economic times. This explains why the company performs well in recessionary scenarios, supporting stable revenue and profit trends regardless of GDP growth, interest rates, unemployment, consumer confidence, or other macro data points.

Moreover, there is almost no threat of disruption. Coca-Cola doesn’t operate in a high-tech industry that brings in significant venture capital or ambitious entrepreneurs. The market isn’t constantly changing. Operating in a boring industry is a key advantage. And thanks to its unrivaled distribution, wide adoption, and global presence, Coca-Cola’s competitive position is almost impossible to topple.

The company’s success, of course, is predicated on the strength of the brand. And Coca-Cola has been one of the most widely recognized brands for decades. That gives it powerful consumer mindshare, leading to proven pricing power. The ability to consistently raise prices may be the strongest indicator of an economic moat.

All of these factors contribute to Coca-Cola’s impressive profitability. The business model, centered on outsourcing bottling and distribution, also helps keep things lean. The company’s operating margin has averaged more than 26% over the past five years, supporting sizable free cash flow to fund payouts.

When it comes to dividend growth stocks, Coca-Cola is in an elite category. Investing $1,000 to purchase shares is a smart way to build a dependable income stream in your portfolio.

Should you buy stock in Coca-Cola right now?

Before you buy stock in Coca-Cola, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy.

The Ultimate Dividend Growth Stock to Buy With $1,000 Right Now. was originally published by The Motley Fool