KO Analysis: 64 Years of Dividend Hikes and a 15% YTD Rally — Has Coca-Cola's Premium Gotten Too Rich?

Coca-Cola currently trades at a trailing P/E ratio of 25.96x, a price-to-book ratio of 9.35x, and an EV/EBITDA multiple of 18.0x. These are elevated multiples by almost any standard — and they've expanded over the past year. For context, the consumer staples sector typically trades at a trailing P/E of 20-22x, meaning KO commands a roughly 20-30% premium to its sector peers.

The price-to-sales ratio of 6.27x is also at the high end of its recent range, having climbed from 5.57x in 2023 to its current level. The stock's price-to-free-cash-flow ratio tells an even more striking story: at 56.8x, it has more than doubled from 26.1x in 2023 — reflecting a meaningful deterioration in cash flow conversion even as the stock price has climbed.

On a forward basis, using FY2025 EPS of $3.04, the trailing PE sits at approximately 26x. The PEG ratio for 2025 came in at 0.98, suggesting that if Coca-Cola can sustain its current earnings growth trajectory, the valuation may be justifiable — but there is little margin for error at these levels.

One bright spot: the annual EV/EBITDA has actually ticked down slightly from 19.2x in 2024 to 18.0x in 2025, driven by EBITDA growth. But the overall picture remains one of a stock priced for perfection in an uncertain macro environment.

Coca-Cola generated $47.94 billion in revenue for fiscal 2025, up from $47.06 billion in 2024 — a modest 1.9% increase year over year. The quarterly revenue trajectory showed typical seasonality, with Q2 ($12.54B) and Q3 ($12.46B) as the strongest quarters, while Q1 ($11.13B) and Q4 ($11.82B) came in lighter.

Gross profit margins improved to 61.6% for the full year, up from 61.1% in 2024 and 59.5% in 2023 — a clear sign that pricing power and cost management initiatives are working. However, operating margins told a more nuanced story. While Q2 (34.1%) and Q3 (32.0%) showed excellent operating leverage, Q4 operating income plunged to just $1.84 billion with a 15.6% operating margin, dragged down by elevated SG&A expenses of $4.2 billion and over $1 billion in other charges.

Full-year net income reached $13.14 billion, a 23.6% increase from $10.63 billion in 2024. Diluted EPS for the year came in at $3.04, up from $2.47 in the prior year. However, the Q4 EPS of $0.53 was notably weak compared to Q2 ($0.88) and Q3 ($0.86), suggesting one-time charges weighed on the final quarter.

Coca-Cola ended 2025 with $10.27 billion in cash and cash equivalents and $13.87 billion in total cash and short-term investments. Total assets stood at $104.8 billion against total liabilities of $70.5 billion, yielding a stockholders' equity of $32.2 billion.

The company's total debt load is $45.5 billion, with $42.1 billion in long-term debt and $3.4 billion in short-term borrowings. The debt-to-equity ratio improved to 1.41x in 2025 from 1.84x in 2024, and the net-debt-to-EBITDA ratio came down to 1.88x from 2.21x — both positive trends reflecting either debt reduction or EBITDA expansion.

The current ratio improved substantially to 1.46x from 1.03x in 2024, indicating significantly better short-term liquidity. Interest coverage remains healthy at 8.3x, and the company has no immediate refinancing concerns.

However, the biggest red flag on the balance sheet is the deterioration in operating cash flow. Coca-Cola generated just $7.41 billion in operating cash flow in 2025, down sharply from $11.60 billion in 2023 and $6.81 billion in 2024. Free cash flow followed suit, falling to $5.30 billion from $9.75 billion in 2023. While some of this relates to working capital timing — particularly a $7.2 billion adverse swing in working capital — investors should monitor whether this normalizes.

The dividend remains well-covered by net income ($13.1B net income vs. $8.8B in dividends paid), but the payout ratio relative to free cash flow is stretched at roughly 166%. The company paid $8.78 billion in dividends in 2025 against just $5.30 billion in free cash flow — a gap that was funded by the balance sheet. This is sustainable in the short term but unsustainable if FCF doesn't recover.

Coca-Cola's competitive advantages are among the most durable in all of corporate America. The company operates the world's largest beverage distribution system, its brand portfolio spans virtually every non-alcoholic beverage category, and its asset-light franchise model — where bottling partners handle capital-intensive manufacturing and distribution — enables consistently high returns on invested capital.

Return on equity stood at a remarkable 40.7% in 2025, essentially unchanged from 42.8% in 2024 and 41.3% in 2023. ROIC came in at 13.0%, up from 10.5% in 2024. These are returns that very few companies of Coca-Cola's size can match, and they reflect the inherent efficiency of the concentrate-and-syrup business model.

On the growth front, Coca-Cola has been investing in category expansion — particularly in energy drinks (through its stake in Monster Beverage and its own brands), coffee (Costa Coffee), and alcohol-adjacent beverages (Topo Chico Hard Seltzer, Jack Daniel's & Coca-Cola). The company's innovation pipeline also includes reduced-sugar formulations and functional beverages targeting health-conscious consumers.

AI and digital disruption pose limited direct risk to Coca-Cola's core business — people still need to drink beverages, and brand loyalty in the category is deeply entrenched. However, the company is leveraging AI and data analytics across its supply chain, dynamic pricing, and marketing optimization, which should provide incremental margin benefits over time.

The key risk to Coca-Cola's growth story remains the GLP-1 weight-loss drug phenomenon. As medications like Ozempic and Mounjaro reduce appetite and sugar cravings, there are open questions about long-term demand for sugary beverages. Coca-Cola has been proactive in expanding its zero-sugar lineup — Coca-Cola Zero Sugar has been one of the fastest-growing brands in the portfolio — but this remains a narrative risk worth monitoring.

Analyst estimates for 2028 project quarterly revenue ranging from $12.2 billion to $13.8 billion, suggesting a full-year 2028 revenue run rate of approximately $51.9 billion — implying a mid-single-digit compound annual growth rate from 2025 levels. Estimated EPS for 2028 quarters range from $0.69 to $1.08, with an annualized run rate of approximately $3.71, representing roughly 5-6% annual EPS growth from the 2025 base of $3.04.

Coca-Cola's next earnings announcement is scheduled for April 28, 2026, which will provide the first look at Q1 2026 performance and updated full-year guidance. Management's 2026 outlook was described as 'tepid' by Benzinga, which contributed to the value-score downgrade despite the stock's strong price performance.

The company's 64th consecutive dividend increase — announced just yesterday — remains a powerful signal of management's confidence in the business. At the new annualized rate of $2.12, the forward dividend yield is approximately 2.7% at current prices. While modest, this yield is backed by one of the most reliable dividend growth streaks in the S&P 500.

Key catalysts to watch include: (1) whether operating cash flow normalizes in 2026 after two years of working capital headwinds; (2) the pace of international volume recovery, particularly in Latin America and Asia-Pacific; (3) pricing elasticity as commodity costs stabilize; and (4) any strategic M&A to bolster the portfolio in high-growth categories.

Key risks include: continued currency headwinds from a strong U.S. dollar, potential regulatory action on sugary beverages in key markets, the longer-term GLP-1 demand question, and the possibility that the stock's premium valuation contracts if growth disappoints.

Coca-Cola is a Dividend King — one of only a handful of companies to have raised its dividend for more than 50 consecutive years. The 64th consecutive increase announced on February 19, 2026 brought the quarterly dividend to $0.53 per share ($2.12 annualized), a 3.9% increase over the prior $2.04 annual rate.

At the current share price of $78.91, the forward dividend yield is approximately 2.69%. This is down from the 3.1% yield investors were getting just a year ago, reflecting the stock's sharp price appreciation. For income investors, the yield has become less compelling on an absolute basis, though the growth and reliability of the payout remain best-in-class.

The payout ratio based on earnings (67% of FY2025 EPS) remains comfortable, though the ratio versus free cash flow (166%) is elevated due to the aforementioned cash flow compression. The company returned a total of $9.5 billion to shareholders in 2025 through $8.8 billion in dividends and $746 million in share repurchases — a total shareholder yield of approximately 3.2%.

For investors who have held KO for decades, the yield-on-cost is likely many multiples of the current yield. But for new money, the question is whether 2.7% with mid-single-digit dividend growth justifies a near-26x PE when alternatives like PepsiCo offer yields above 3.3% at a lower P/E of approximately 21x.