Is Coca-Cola’s Dividend at Risk of a Cut?

With a yield of 2.83%, Coca-Cola’s (NYSE:KO | KO Price Prediction) dividend is still safe.

For one, the company has a stable 63-year history of dividend payments.

It just paid out a 51-cent dividend ($2.04 annualized) on April 1. Two, its current payout ratio is 79%, which means that about 79% of its earnings are distributed to shareholders as dividends. It also gives the company plenty of wiggle room to continue boosting its dividend.

In addition, as of late last year, KO has a debt-to-capital ratio of 0.62, which tells us it can handle debt without much financial strain.

In short, Coca-Cola’s dividend is very safe.

Dividend Aristocrats like Coca-Cola Offer Safety in Chaos

As noted by Barron’s, “In five recent market meltdowns, including the dot-com bust, the 2008-09 financial crisis, the 2011 federal debt ceiling standoff, Covid, and the 2022 interest-rate hike cycle, the average peak-to-trough decline for the S&P 500 was roughly 40%, while the average peak-to-trough decline for the dividend aristocrats was about 25%.”

We also have to consider that Coca-Cola has strong fundamentals, and respectable cash flows, which will also keep its dividend safe. Its profit margins are healthy. Its current gross profit margin of 61% is nearly 70% above the sector average of 36%. It also ended 2024 with $15.9 billion in free cash flow, which was up about 180% year over year.

Again, all of this will keep KO’s dividend safe.

Earnings have also been solid. In its most recent quarter, Coca-Cola beat on the top and bottom lines. EPS of 55 cents beat estimates by three cents. Revenue of $11.5 billion, up 6.5% year over year, beat by $800 million. Organic revenue was up 14%, as compared to expectations of 7.2%.

Coca-Cola Also Offers Stability in Chaos 

The stock also offers a good deal of safety in uncertain times, as we’re seeing now.

It has rock-solid fundamentals. And its products sell regardless of what’s happening in the economy. Also, while consumers do cut back on expenses in times of disarray, they don’t typically stop buying Coca-Cola products.

Instead, consumers tend to keep buying Coca-Cola products through periods of turmoil. That’s how the company has managed to grow its yield, even in turbulent times.