If there’s one thing Warren Buffett knows, it’s how to unload Apple stock like it’s the plague pick a stock and let it do its magic. Back in 1988, Buffett took a big sip of Coca-Cola stock, and he hasn’t put the bottle down since. And now, 36 years later, Coca-Cola just hit its highest stock price ever. This year alone, Buffett is set to pocket $776 million in dividends from his investment. Can you imagine waking up one morning and seeing that many zeroes? It’s every investor's wet dream.

Inflation and sky-high interest rates have turned the business world into a battlefield, and many companies are struggling to stay in the black. Take Pepsi, for example—they’re still a big name, but their profit margin has shrunk to a not-so-refreshing 15%, even with slightly higher revenue. However, Coca-Cola has managed to keep raking in the dough. With a solid 23% profit margin, Coca-Cola has remained resilient while consumers continue to prioritize their favorite brands. The company's sales have remained strong, with Coca-Cola generating $12 billion in revenue in the latest quarter, driven by steady demand for products like Gatorade and those large movie-theater Sprites that make going to the movies worth it.

So, what’s behind Warren Buffett’s love affair with Coca-Cola, and should you consider adding it to your portfolio too? Sure, the guy drinks five cans a day with his potato chips—that’s commitment for you. But let’s crack open the real reasons Coca-Cola remains a beloved choice for long-term investors and why Buffett’s been hooked for decades.

At its core, Coca-Cola is a straightforward business: it makes beverages that people love. But the real strength of Coca-Cola lies in how the company generates and manages its cash flow. As Warren Buffett famously said, "It’s such a good business, even an idiot could run it." And with a track record like theirs, it’s hard to argue. Coca-Cola has been paying and raising dividends for 63 years straight, earning its place as a "Dividend King," a title given to companies that have increased dividends for at least 50 consecutive years. This consistent and growing payout is a testament to the business’s enduring strength.

Looking beyond the revenue numbers, Coca-Cola has made impressive strides in margin expansion. Earlier this year, they announced it was pouring $1.1 billion into generative AI applications in partnership with Microsoft. This isn’t just a flashy headline—they’re betting on AI to dig into every nook and cranny of their operations, from optimizing ad campaigns to fine-tuning the bottling process. The goal? To squeeze every last drop of efficiency out of their system and fatten up those margins.

Some might argue that Coca-Cola’s current valuation is a bit steep. The stock's price-to-earnings (P/E) ratio has seen significant expansion, currently trading at 29 times earnings and 34 times free cash flow. And while this might make the stock appear pricey, it's important to consider that Coca-Cola has generated a return of over 13% this year. 

Buffett's Coca-Cola investment, which originally totaled $1.3 billion, now delivers a jaw-dropping effective yield of 60% in dividends alone. If you’re a long-term investor, this is exactly the kind of compounding magic you hope for. While newer investors might balk at the current valuations, the dividends alone make Coca-Cola a stock worth holding.

Should you buy Coca-Cola stock today? It depends on your investment goals. This is not a get-rich-quick play, but more like the old friend who’s always there when you need him. Coca-Cola isn’t going anywhere, and neither are its dividends. The company’s ability to adapt to market changes and maintain its payout makes it a solid pick for the long haul. Just ask Buffett—he’s been sipping on this stock for decades, and he’s not putting it down anytime soon.

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Stocks.News holds positions in Coca-Cola, Pepsi, and Microsoft.