History Says This Is the Amount of Yearly Dividend Income a $10,000 Investment in Coca-Cola Stock Could Generate by 2036
Key Points
With $10,000 invested in Coca-Cola today, you get around 112 shares, generating $237.44 in annual dividend income.
Assuming this Dividend King keeps steadily raising its payout by around 3% annually for the next decade, this same position could yield you $319.20 in annual dividend income.
With dividends reinvested, the impact could be even more significant, as $10,000 invested 10 years ago in Coca-Cola, with dividends reinvested, has snowballed into a position worth nearly $29,000.
From everyday investors to Warren Buffett's holding company, Berkshire Hathaway, many have made Coca-Cola (NYSE: KO) a core portfolio position, largely due to its long track record of dividend growth.
Coca-Cola is one of the Dividend Kings, or stocks with at least 50 years of consecutive annual dividend increases. Expecting this trend to continue, how much could a $10,000 position in Coca-Cola, entered today, yield you in 2036?
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Coca-Cola stock: What does a $10,000 position yield you today?
Recently trading for around $89.35 per share, a $10,000 investment in Coca-Cola amounts to around 112 shares. In February, the company's board implemented its 64th consecutive annual dividend increase, hiking the payout by around 4% from $0.51 to $0.53 per share.
That's around $2.12 per share annually. Multiply that by 112 shares, and you get $237.44 for the annual dividend income generated from the position. This equates to a forward dividend yield of around 2.37%.
What this position could pay you annually, 10 years out
Recently, Coca-Cola has reported very strong earnings growth, including adjusted earnings per share (EPS) growth of around 11%, but it's unclear whether this earnings resurgence persists.
Still, even if growth reverts to mid-single-digit norms, the company will remain well-positioned to implement 2% to 4% annual dividend increases. Splitting it down the middle, and assuming that Coca-Cola will increase its dividend 3% annually, that could mean that this blue chip stock's annual payouts are around 34.4% above present levels.
In other words, annual dividends totaling around $2.85 per share. Multiplied by 112 shares, and the aforementioned $10,000 position generating $237.44 could be generating $319.20 in annual dividend income. With dividends reinvested, the impact is much more significant. Over the past decade, Coca-Cola shares have generated total returns, or price appreciation plus dividend payouts, totaling 187.6%.
If shares deliver similar total returns in the decade ahead, today's $10,000 position could be worth nearly $29,000, generating hundreds in annual dividend income to boot.
Thomas Niel 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.