Coca-Cola as the Bedrock of a New Investor’s Portfolio

Experienced investor James Brumley shares his strategy for building a portfolio from scratch with $10,000, emphasizing the importance of anchoring it with a rock-solid dividend stock. Instead of chasing the market’s hottest growth stocks, Brumley advises new investors to focus on generating reliable income early on. This approach creates a financial cushion, allowing for more selective investments in riskier opportunities as they arise.

Brumley highlights Coca-Cola (NYSE: KO) as his top pick for a foundational holding. While Coca-Cola may not be the most exciting or high-growth stock, its predictable business model and consistent dividend make it a strong choice. With a forward-looking dividend yield of 2.5%, the stock may not be the most thrilling, but its steady income can become a growth investment over time. Over the past 20 years, Coca-Cola’s stock price has appreciated 285%, and reinvesting dividends would have more than doubled the total net return for this period.

The article notes that Coca-Cola’s quarterly dividend has grown from $0.31 in 2006 to $0.51 today. A $10,000 investment in 2006 would have yielded nearly $19,300 by 2026, with an annual dividend income of over $450. The company has raised its annual payout for 64 consecutive years, making it a Dividend King. Brumley also points out that Coca-Cola’s stability makes it less nerve-racking to hold during volatile market conditions.

While Coca-Cola is a strong foundational stock, Brumley acknowledges that other dividend stocks offer similar benefits. However, he feels particularly comfortable counting on Coca-Cola for the long term due to its perpetually marketable products in any economic environment. The article concludes by mentioning that while Coca-Cola is a solid choice, The Motley Fool Stock Advisor team has identified other stocks they believe could produce even higher returns.