60 years of dividend growth! This Warren Buffett stock could make me rich

Warren Buffett is a legendary figure in investment circles. His philosophy of value investing has made him the fifth richest person in the world Berkshire Hathaway with a value of $108 billion. Therefore, I think it is worth looking at Berkshire’s stock market position as inspiration for my own portfolio.

One stock exits because of 60 years of dividend growth. Thanks to its track record of passive income and dividend aristocrat status, I think this company can help me build wealth in the long term.

The dividend stocks I recommend are Coca Cola (NYSE: KO).

Warren Buffett holds the fifth largest

Buffett first acquired shares of Coca-Cola in 1988. Today, it is the fifth largest position in Berkshire with almost 7% of the portfolio. Buffett’s company owns 400 million shares in the beverage giant, which is equivalent to 9.2% of all outstanding Coca-Cola shares.

This has been shown consistently in Berkshire’s portfolio for 35 years. Based on dividend income alone, Buffett’s Coca-Cola stock holdings double the billionaire’s initial investment every two years.

Today, the company’s stock offers a 2.95% dividend.

Positive finances

The Coca-Cola Company is 131 years old. It is the most famous beverage brand in the world with an instant recognition factor in almost every country. Interestingly, 2.1bn servings of Coke products are consumed worldwide every day.

Turning to Q3 2022 results, there is much to be thankful for. The business generated net income 10% to $11.1bn and earnings per share (EPS) rose 14% to $0.65.

Additionally, a free cash flow margin of 27.1% is a sign of continued dividend strength.

I also like the diverse geographical footprint. Coca-Cola sells its drinks on every continent and, as a result, does not rely heavily on a single region to generate profits.

Stock value

Coca-Cola’s price-to-earnings ratio is above 26. That is higher than the long-term average and there is a risk that the stock price and earnings growth prospects are not attractive at the current price.

However, Buffett bought Coca-Cola stock at an average price of 15 times EPS in 1988. Of course, that’s a lot cheaper than it is today. However, the purchase came after the 1987 stock market crash.

In that context, it is important that this is not a deeply valued stock as many investors have dealt with over the years.

This reminds me of an unforgettable Buffett quote.

It is far better to buy a good company at a reasonable price than a fair company at a good price.

Berkshire Hathaway Chairman’s Letter 1989

With its strong pricing power and competitive advantage, I believe Coca-Cola is a good defensive stock to buy, despite its current price.

My portfolio

I have Coca-Cola stock in my diversified portfolio. I plan to hold him for a long time, exactly like Warren Buffett.

The company has generated 8.75% total annual return over the past 20 years. It also upgraded its EPS and revenue growth expectations to 6-7% and 14-15% for 2022, indicating bright prospects.

Because of its resilient business model, I think there is a reason why Coca-Cola can continue to generate good results (despite the possible risks).

For example, let’s imagine replicating an annual growth rate of 8.75% for the next 35 years. An initial £53,500 investment will balloon to over £1m!

I don’t have enough money to invest that amount right now. However, I will continue to buy these stocks regularly in the coming years to build long-term wealth.