Meet the Dividend King That's Quietly Crushing the S&P 500 in 2026. Here's Why It's a Buy This August.
Coca-Cola (KO) is highlighted as a top investment, outperforming the S&P 500 with a 27% year-to-date return. The company's asset-light restructuring has boosted net margins to 31%, significantly higher than the index average. As a Dividend King with a 64-year streak of annual increases, KO offers a 2.4% yield and strong free cash flow. Analysts project EPS growth of over 11%, supporting further dividend hikes and making it a compelling buy for investors.
One of the best blue chip stocks on the market is not only a reliable dividend payer and raiser, it has also crushed the market lately. Shares of the company, which runs a highly profitable and ever-growing business familiar to billions of people, have returned more than 27% this year, almost double the 14.5% of the benchmark S&P 500 index.
Personally speaking, this has been one of my favorite large-cap stocks for years.
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The world's favorite drink maker
It's very possible you have one of this company's products in your refrigerator, or even open at your desk, as we speak. This ever-impressive enterprise is beverage titan Coca-Cola (KO +2.16%).
The company needs little introduction, as the vast majority of the world's population is familiar with its signature drink. What many don't know is that Coke, the beverage, is merely one of over 200 libations in the company's portfolio. It also owns other classic sodas (Sprite and Fanta, to name only two), sports drinks (Powerade), and even canned cocktails (Fresca Mixed).
That sets it apart from the company usually considered its top rival, PepsiCo, which combines a wide selection of snack foods with its beverage portfolio.
In the mid-to-late 2010s, Coca-Cola began restructuring its business, divesting itself of capital-intensive production operations like bottling plants and warehouses. For the most part, it sold them to the local bottlers it had been doing business with for years.
This transformed the company into a lean, asset-light operation that focuses on selling its concentrates and syrups, and on the huge marketing effort that maintains the high profile of its drinks.
The shift also lifted Coca-Cola's already-impressive profit margins even higher. These days, they're well above those of most blue chips.
Take the company's second quarter -- global case volume rose by 5% year over year, which was strong given the age of its brands and their ubiquitous presence. That helped boost revenue by 7% to $13.4 billion, and adjusted net income by 6% to nearly $4.2 billion.
That makes for a net margin of 31%. Recently, the S&P 500 index (of which Coca-Cola is a component) has seen an uptick in average profitability among its constituent companies. The drinks giant beats the pants off this figure; in fact, its percentage is nearly double that average of 15.7%.
NYSE: KO
Key Data Points
64 years of dividend hikes, and more to come
If managed well, a consistently profitable business will throw off tons of cash. Mission accomplished with Coca-Cola, as the company's free cash flow for the first half of the year clocked in at $6.9 billion. That's the kind of cash generation that can not only fund a generous dividend, but keep it constantly on the rise.
Coca-Cola is a champion at this. It's one of the market's rare Dividend Kings, that small group of companies that have engaged in dividend raises at least once every year for a minimum of 50 years running. Even among that exclusive lineup, the company is near the top with its current 64-year streak.
The company's dividend raises aren't token or marginal, either. In February, it bumped the quarterly payout 4% higher to $0.53 per share. That annualizes to $2.12 per share, yielding a fizzy 2.4%. While we're on the subject of Coca-Cola crushing S&P 500 index numbers, that's more than double the current 1% average of the index's component stocks.
Since the company's business is easier to predict than others and is tracked by many analysts, its revenue and profitability usually land close to estimates. So it's encouraging that the consensus analyst projection for annual earnings per share (EPS) is $3.34, more than 11% higher than the 2025 number. Revenue is expected to rise by over 3% to $49.7 billion.
Meanwhile, at the start of 2027, we can expect yet another dividend raise. So Coca-Cola's fundamentals and its payout are slated to rise, and surely not for the last time. What more could you want from an investment? To me, this eternal rock star of a stock is not only a buy in August, but also in any other month on the calendar. Every investor should consider owning it.
