Coca-Cola (KO 0.66%) is one of the most recognized brands in the world. Thanks to its global reach and wide product range, the company has long been the market leader in soft drinks. But that hasn’t necessarily helped investors recently.

Over the last five years, Coca-Cola has achieved a total return of only 47%. S&P500would have more than doubled your initial capital in the same period.

Shareholders are wondering whether better days are ahead for the beverage giant. Where will this dominant Drinks supply in five years?

Nowhere to grow

Investors need to be aware that Coca-Cola is not going to report huge growth numbers. In fact, the opposite is true. Revenues in the most recent quarter (the second fiscal quarter of 2024, which ended June 28) were $12.4 billion, a modest 24% increase from the second quarter of 2019 five years ago.

Compared to fast-growing industries, Coca-Cola is a dinosaur. Nevertheless, the company has gained market share over the years.

Accordingly Wall-Street According to analyst consensus estimates, Coca-Cola is expected to grow its revenue by an average of 3.6% annually between 2023 and 2026. That’s certainly nothing to write home about.

But Coca-Cola is pursuing a different strategy to offset the weaker growth in unit sales. In the last quarter, for example, prices for the company’s various products were 4 percent higher than in the same period last year (excluding markets with very high inflation). There is evidence of pricing power here.

Safe and stable

For investors who simply want certainty in the individual stocks they buy, there may be no better company than Coca-Cola. I have already mentioned that it one of the strongest brandsThis intangible asset secures the company’s competitive position. And it has helped Coca-Cola to remain in the minds of consumers for so long.

In addition to its brand strength, Coca-Cola is a safe company to buy and hold because it is consistently profitable. The company’s operating margin has averaged an excellent 27.6% over the past five years, better than a leading Internet company like alphabet.

Since the company is at a mature stage of its life cycle, there aren’t really many opportunities to reinvest in growth initiatives. Therefore, Coca-Cola pays out large amounts of cash to its shareholders. This helps to increase investor returns.

A key part of the investment thesis must focus on dividends. Coca-Cola’s annual payout has increased for 62 consecutive years, and the streak is still ongoing. That’s an incredible track record that underscores the company’s durability and consistency.

With its 400 million shares Berkshire-Hathaway is able to generate a passive annual income of $776 million from Coca-Cola dividends alone. This is probably one of the main reasons why Warren Buffet is not selling its stake in the soft drink giant.

Don’t expect huge returns

Compared to the S&P 500, Coca-Cola has not been a profitable investment. I see no reason why this trend should not continue.

At the time of writing, shares are trading at a price-to-earnings (P/E) ratio of 28. That’s higher than the overall market. And it represents a premium to Coca-Cola’s average P/E ratios over the past three and five years. This seems like a poor entry point for potential investors.

I am convinced that Coca-Cola will continue to generate total returns that lag the S&P 500 between now and August 2029. And that is precisely why I am not considering adding the company to my own portfolio.