The S&P 500 index is trading near all-time highs, and its price-to-earnings ratio is near the high end of its historical range. That has investors worried about a bear market. What if you could find an investment with an above-market yield, a below-average P/E ratio, and strong operating performance?
That investment would be Coca-Cola(NYSE: KO). Here are three reasons to buy this stock now, particularly if you are worried about a bear market.
One of the core reasons to like Coca-Cola is foundational. It is one of the world’s largest and best-run consumer staples makers. Consumer staples are products that consumers buy on a regular basis, regardless of what is happening on Wall Street. In fact, the necessity nature of most consumer staple products means they are normally bought even during recessions. Coca-Cola’s focus is, effectively, on making liquids. Hydration is a life necessity.
Image source: Getty Images.
In fairness, Coca-Cola’s beverages, from its namesake cola to sports drinks, are best viewed as luxuries, since you could just as easily drink tap water. However, they are affordable luxuries that have amassed a huge amount of brand loyalty. During tough times, some consumers may opt for lower-priced alternatives, but most will remain loyal to the brands they love.
Beyond the products, meanwhile, is a globally diversified business with distribution, marketing, and innovation skills that are on par with any of its consumer staples peers. And Coca-Cola is large enough to act as an industry consolidator, using acquisitions to quickly add new products and brands if it has fallen behind consumer trends in some way.
Simply put, Coca-Cola is a well-run company that just about any investor could happily own for the long term.
The business strength is highlighted by one particular achievement — Coca-Cola is a member of the elite group of companies known as Dividend Kings. It comes in at number seven on the list, with 63 annual dividend increases to its name. That’s an incredible track record of consistency, which highlights the importance of the dividend to both management and the board of directors.
The dividend yield, meanwhile, is 2.9%. That is materially better than the S&P 500’s 1.1% yield, but it is also more attractive than the 2.7% average for the consumer staples sector as a whole. So, not only are you getting a reliable dividend stock, but you are also collecting an attractive income stream.
Meanwhile, the core business continues to perform well, with organic sales up 6% in the third quarter of 2025. That’s an increase from 5% in the second quarter and far above peer PepsiCo’s third quarter organic sales gain of just 1.3%. Essentially, there’s no indication that Coca-Cola’s dividend, or its business, is at any risk. Owning reliable dividend stocks can help distract you from the ravages of a bear market.
So far, so good, but overpaying for a great company can turn it into a bad investment. Luckily, Coca-Cola looks reasonably priced, if not a little cheap. The price-to-sales ratio is roughly in line with its five-year average. The dividend yield, while attractive on an absolute basis, is middle of the road, historically speaking. Both of these facts hint at a fair price.
However, the stock’s price-to-earnings and price-to-book value ratios are both below their five-year averages. That suggests the stock is trading hands at a discount.
Valuation is more art than science, and the metrics above are just short-cut tools. However, taken together, they paint a picture of a stock that is somewhere between reasonably priced and slightly inexpensive. Paying a fair price for a great company is likely a good call for conservative investors who prefer to buy and hold for the long term.
One of the interesting aspects of consumer staples stocks is that they are often viewed as safe havens during bear markets. The sector is generally unloved right now thanks to consumer buying trends, but Coca-Cola appears to be deftly managing that headwind. If a bear market occurs and a flight to safety ensues, you may miss your chance to buy this well-run consumer staples Dividend King while it appears reasonably priced.
Before you buy stock in Coca-Cola, consider this:
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