1 Reliable Dividend Growth Stock Down 13% to Buy Right Now

Coca-Cola (NYSE: KO) is an icon in the consumer staples sector and on Wall Street. Notably, it has been a longtime holding of Warren Buffett and Berkshire Hathaway.

However, just because a famous investor owns a stock doesn't mean you should buy it. That said, Coca-Cola does indeed look like it's worth buying right now. Here's why.

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What does Coca-Cola do?

Coca-Cola is the world's largest beverage company. Nearly everyone around the globe has heard of its namesake cola, but its business offers far more than that with everything from bottled water and sports drinks to coffee and tea. Although operating only within the beverage sector makes Coca-Cola something of a one-trick pony, it's a giant in the niche it has chosen.

This is notable because Coca-Cola has access to a massive distribution network. It is a powerful force in the advertising space. It has the size and financial strength to act as an industry consolidator, which means it can buy hot new brands to expand its portfolio.

Factors like these help to keep the company at the top of the beverage industry. It's highly unlikely it will be toppled anytime soon. And this reliable consumer staples stock boasts an impressive 62-year streak of annual dividend increases, putting the company in an elite group of stocks known as Dividend Kings. Over the past decade, shareholders have enjoyed roughly 5% annualized dividend growth.

Data by YCharts.

A great company at the right price

Every investor wants to find the hidden gem that no other investor has seen, but that's just not how things usually work on Wall Street unless you're willing to take on a lot of risk.

However, every company goes through bad times, eventually, and Coca-Cola is facing some headwinds right now. Most notably, investors are worried that consumer tastes (and perhaps regulator attitudes) are shifting in a healthier direction at the same time that new weight loss drugs are shaking up the health and food industries. As a result, the stock is down 13% from the all-time high it reached last year.

That's pushed the dividend yield up to 3.1% as of this writing, which is about average for the stock over the past five years (and the last decade). However, Coca-Cola's price-to-sales, price-to-earnings, and price-to-book value ratios are all slightly below their five-year averages, making this an attractive entry point.

Paying a fair price for a great company is a reasonable proposition for income investors who intend to buy and hold for the long term. Could Coca-Cola stock fall further? Sure, it has had larger drawdowns in the past. That said, the most recent pullback is from the stock's all-time highs, and Coca-Cola has a long track record of marching higher over time while rewarding shareholders with a rising dividend too.

Buffett has owned Coca-Cola for decades

Warren Buffett has long valued that track record with his Coca-Cola position. The Oracle of Omaha has happily owned the beverage giant for decades, including through some big sell-offs for the stock. The key is he stuck it out each time, ignoring the price swings to focus on the long-term growth of one of the world's most valuable brands.

And that long-term growth story isn't over yet. As long as you're also willing think in years, not days and months, you'll likely be very happy to have this Dividend King in your portfolio.

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*Stock Advisor returns as of January 27, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.