Is Coca-Cola Still a Buy-and-Hold Winner in 2025?

Coca-Cola has long been a cornerstone of income-focused portfolios, celebrated for its unbroken streak of 63 consecutive years of dividend increases. As 2025 unfolds, the question remains: Does this beverage giant still justify its status as a buy-and-hold winner, particularly for investors seeking reliable income and alignment with Warren Buffett's long-term strategy? Let's dissect its financial health, dividend sustainability, and growth potential through the lens of Berkshire Hathaway's enduring stake in the company.

Financial Health: Strong Margins, But Debt Lingers

Coca-Cola's Q3 2025 results underscore its resilience. Organic revenue grew 6% year-over-year to $12.5 billion, with operating income surging 59% and a 32.0% operating margin, reflecting disciplined cost management and pricing power. Free cash flow (FCF) for the year-to-date reached $2.4 billion, a modest but encouraging figure given the company's capital-intensive nature. However, its debt-to-equity ratio of 2.19 as of September 2025 remains elevated, though it has shown a gradual decline from 2.67 in March 2025. While Coca-Cola's leverage is not alarming by historical standards, investors must monitor its ability to service debt amid potential interest rate hikes or economic downturns.

Dividend Sustainability: A Time-Tested Engine

Coca-Cola's dividend machine remains robust. The company's 2025 payout ratio of 67.85% is comfortably below the 80% threshold often cited as a red flag for sustainability. With a quarterly dividend of $0.51 per share (totaling $2.04 annually), the stock offers a 2.9% yield, outpacing the S&P 500's 1.3% average. For Berkshire Hathaway, this translates to $816 million in annual dividend income from its 400 million-share stake-a yield on cost exceeding 62% since Buffett's initial investment in 1988. Analysts project a 4.5% annual dividend growth rate over the next decade, bolstered by Coca-Cola's $3.7 billion in year-to-date operating cash flow.

Warren Buffett's philosophy of compounding dividends is on full display here. By reinvesting Coca-Cola's payouts, Berkshire has amplified its ownership stake without additional capital outlay, a strategy that has turned a $1.3 billion investment into a $27.6 billion asset. This compounding effect, as Buffett often emphasizes, rewards patience and aligns with the "forever stock" ethos of Coca-Cola's durable economic moat.

Growth Potential: Innovation and Global Expansion

Coca-Cola's growth story in 2025 hinges on its pivot toward nonsparkling beverages and emerging markets. The company has expanded its portfolio to include products like Fuze Tea and acquired Fairlife for premium dairy offerings, diversifying beyond its carbonated core. Its global distribution network-a competitive advantage Buffett once called "the most efficient in the world"-enables rapid scaling in regions like Southeast Asia and Africa, where per capita beverage consumption is rising.

Financial metrics reinforce this optimism. Coca-Cola's return on equity (ROE) of 41.7% and return on invested capital (ROIC) of 11.2% highlight its ability to generate returns from reinvested earnings. While international markets introduce currency risks, the company's diversified revenue streams and pricing power mitigate these headwinds. For instance, Coca-Cola Consolidated, a key bottler, reported a 6.9% revenue increase in Q3 2025, driven by sparkling and still categories.

Buffett's Enduring Bet: A Case for Long-Term Value

Warren Buffett's 1988 investment in Coca-Cola was rooted in its "wide economic moat"-a term he frequently uses to describe companies with enduring competitive advantages. At the time, Coca-Cola's stock was undervalued post-1987 crash, and its brand strength, global reach, and consistent cash flows made it a "forever stock" as detailed in analysis. Today, Berkshire's 9.3% stake remains a testament to this strategy, with the investment now valued at over $27.6 billion as reported by financial sources.

Buffett's approach to Coca-Cola is a masterclass in long-term thinking. By prioritizing dividend reinvestment and capital preservation, he has transformed a $1.3 billion bet into a compounding engine that generates $816 million annually in passive income. This aligns with Coca-Cola's 2025 guidance of 5–6% organic revenue growth and 8% earnings-per-share expansion, which management attributes to pricing discipline and product innovation as reported in Q3 results.

Risks and Realities

No investment is without risks. Coca-Cola's free cash flow declined 51.36% in 2024 to $4.74 billion, raising concerns about its ability to fund dividends and share repurchases. Additionally, its exposure to international markets-where volume growth has lagged-could dampen long-term prospects as noted in financial reports. However, the company's low beta of 0.464 and defensive market positioning make it a relative safe haven during volatility according to market analysis.

Analysts remain cautiously optimistic. A discounted cash flow analysis suggests Coca-Cola is undervalued by 12.5%, with an intrinsic value of $78.25 per share as of October 2025. While bearish views highlight margin pressures, the bull case rests on Coca-Cola's ability to adapt-whether through digitalization, strategic acquisitions, or its recent exploration of options for the Costa Coffee business.

Conclusion: A Buy-and-Hold Winner for Income Investors

Coca-Cola's 2025 performance reaffirms its status as a dividend-producing blue-chip stock. Its strong margins, disciplined capital allocation, and 63-year dividend streak make it a compelling choice for long-term investors. While debt levels and free cash flow fluctuations warrant attention, the company's competitive advantages-brand equity, global distribution, and a history of innovation-position it to navigate challenges.

For those aligned with Warren Buffett's strategy of compounding and patience, Coca-Cola remains a "forever stock." Its ability to generate reliable income, coupled with growth from emerging markets and product diversification, ensures its place in a well-balanced portfolio. As Buffett once said, "Time is the friend of the wonderful company, but the enemy of the clumsy one." Coca-Cola, clearly, is neither clumsy nor obsolete.