Coca-Cola's (KO -2.94%) stock rallied about 33% over the past five years, even as the pandemic, inflation, rising interest rates, and geopolitical conflicts rattled the markets. That wasn't surprising, since the beverage giant is often considered an evergreen investment that's well-insulated from economic downturns.

That's also probably why Warren Buffett has kept Coca-Cola in Berkshire Hathaway's portfolio since 1988, and why it's currently the conglomerate's fourth-largest holding. So will Coca-Cola continue to generate steady returns over the next five years?

Let's review its business model, growth rates, and valuations to decide.

Image source: Getty Images.

What happened to Coca-Cola over the past five years?

Coca-Cola might initially seem like a risky investment because soda consumption rates have declined over the past few decades. However, it offset that pressure by acquiring and developing more brands of fruit juices, teas, bottled water, energy drinks, coffee, and even alcoholic beverages in select markets. It also refreshed its flagship sodas with new flavors, healthier versions, and smaller serving sizes to attract new customers.

In 2020, Coca-Cola's organic sales and comparable earnings per share (EPS) declined as its adjusted free cash flow (FCF) barely grew. That slowdown was largely caused by the pandemic, which throttled its sales to restaurants as more diners stayed at home. It only partly offset that pressure with its stronger retail sales at supermarkets and other retailers.

Data source: Coca-Cola.

Coca-Cola's organic sales and comparable EPS bounced back over the following four years as the pandemic headwinds dissipated. Its adjusted FCF dipped in 2022 as it dealt with higher-than-expected taxes, lapped some working capital benefits in 2021, paid out higher incentives, and increased its inventories to hedge against volatile commodity prices. However, its adjusted FCF grew again in 2023 and 2024 as those costs declined and it raised its prices to counter inflation.

What will happen to Coca-Cola over the next five years?

For 2025, Coca-Cola expects its organic sales to grow 5% to 6% as its comparable EPS rises 2% to 3%. At $71 per share, Coca-Cola's stock still looks reasonably valued at 24 times the midpoint of that comparable EPS forecast. However, it expects its near-term earnings growth to be throttled by the currency headwinds from a strong U.S. dollar.

On a currency-neutral basis, it expects its comparable EPS to rise 8% to 10% this year. It expects its adjusted FCF to dip 12% to $9.5 billion this year as it makes a big tax payment (its final one related to the Tax Cuts and Jobs Act of 2017) and ramps up some of its working capital initiatives.

If interest rates stabilize and decline, the U.S. dollar should soften against other currencies over the next few years. If that happens, and Coca-Cola expands its comparable EPS at a compound annual growth rate (CAGR) of 5% from the midpoint of its 2025 outlook through 2030, that figure could rise to $3.77 per share by the final year. Assuming it's still trading at 24 times forward earnings, its stock price could potentially rise 27% to roughly $90.48 by the beginning of 2030.

Coca-Cola is also a Dividend King that  has raised its dividend annually for 63 consecutive years. It currently pays a forward yield of 2.9%, which might not seem too impressive compared to the 10-year Treasury's 4.3% yield. But its healthy trailing payout ratio of 79% indicates it has plenty of room for future hikes over the next five years.

It's still an evergreen dividend stock

Coca-Cola's stock won't skyrocket through 2030, but it will remain a reliable evergreen stock for conservative income investors. So if you're looking for a safe stock to buy, hold, and forget in this choppy market, Coca-Cola still checks all the right boxes.