The major indexes just suffered a historic sell-off eerily reminiscent of the COVID plunge in March 2020. But during a week when most stocks were hitting 52-week lows, Coca-Cola (KO -2.39%) was an exception.

Coke hit an all-time high on April 3 before pulling back on April 4. For the week, it was down just 0.6% compared to a 7.9% decline in the Dow Jones Industrial Average (^DJI -0.91%), a 9.1% sell-off in the S&P 500 (^GSPC -0.23%), and a 10% decline in the Nasdaq Composite (^IXIC 0.10%).

Here's why Coca-Cola is holding its ground and whether the dividend stock seems worth buying now.

Image source: Getty Images.

Coca-Cola's supply chain advantage

Up 12.3% year to date, the stock is the second-best performing component of the Dow and is crushing the consumer staples sector and major indexes.

KO data by YCharts.

This outperformance may come as a surprise given it is a global company. Last year, North America made up just 39.6% of operating revenue. The business is heavily dependent on international sales, which are sensitive to trade tensions and currency risks.

But Coca-Cola has several advantages that allow it to absorb higher costs. For starters, it has a network of bottling partners that produce, distribute, and sell its products. This business model reduces risk and leads to higher margins.

It's basically the beverage version of McDonald's, where 95% of the chain's restaurants are franchised. So the company makes most of its money from royalties and rent paid by franchisees.

Coca-Cola doesn't manage or control its bottling partners. Rather, it sells syrup concentrates to these partners.

This business model makes it an extremely profitable company, with a 29.8% operating margin in 2024. For context, Apple's operating margin for its most recent fiscal year was 31.5%. A can of soda is far from a technological marvel like the iPhone, but Coca-Cola's genius supply chain makes it nearly as profitable from a corporate standpoint.

Building an elite brand lineup

A well-oiled supply chain, paired with its expansion outside soda, has built the company into a diversified international giant spanning the entire suite of nonalcoholic beverages: soda, juice, tea, coffee, water, sparkling water, sports drinks, protein drinks, and more.

One of Coca-Cola's greatest differentiating factors is its ability to nurture home-grown brands and unlock the potential of acquired brands. For example, it grew Fairlife, its milk and protein shake brand, from $10 million in sales to $4 billion in just 10 years. Volumes for sparkling mineral water Topo Chico have increased tenfold from pre-acquisition levels in 2016.

Brands like Fairlife and Topo Chico have pole-vaulted the company to No.1 in sparkling soft drinks, juice, and value-added dairy and plant-based beverages in North America. These categories are important in their own right, but even more vital when considering how they complement its soda-heavy sales mix by appealing to health-conscious consumers and changing customer preferences.

In 2023, drinks with the Coca-Cola label made up 44% of North American unit case volumes, compared to 22% for its water, sports, coffee, and tea; 20% for sparkling flavors, and 14% for juice and value-added dairy and plant-based beverages. So the more the company can succeed in categories outside soft drinks, the more diversified it will become.

Pricing power

A formidable supply chain and beverage lineup with global brand recognition give the company more pricing power than its peers. This advantage was on full display during the pandemic and the following spike in inflation. Coca-Cola was able to raise prices and more than offset higher input costs.

In 2024, unit case volume was up just 1%, but an 11% increase in price and mix led to a 12% boost in organic revenues. It was a very similar performance in 2023, with a 2% increase in unit case volumes but a 10% increase in price and mix. The year prior to that had better volume growth, with a 5% increase. But again, like clockwork, price and mix were up 11%.

No matter what the economy is doing, the company has proved time and time again that it can rely on its pricing power to deliver growth even when volumes are weak. This is the exact quality that could separate Coca-Cola from other companies during a prolonged period of burdensome tariffs.

A passive-income powerhouse

Besides being an excellent business from an operational standpoint, it's also a high-quality dividend stock that delivers on shareholder expectations for higher passive income.

Coke has raised its dividend for 63 consecutive years, a period that includes plenty of economic downturns and recessions. It is one of just 55 companies with at least 50 years of dividend increases -- known as Dividend Kings. Investors can count on it and its 2.9% dividend yield to deliver a steady stream of passive income no matter what the economy or broader stock market is doing.

The stock's valuation is reasonable but not cheap, with a 28.3 price-to-earnings ratio (P/E) compared to a 10-year median P/E of 27.5. Coca-Cola stock has historically fetched a premium valuation, and for good reason, given it is a high-quality business.

A balanced buy

Coca-Cola is a well-rounded, safe stock for risk-averse investors to buy now. However, they shouldn't overhaul their portfolios just because the broader market is going down.

Instead of dumping growth stocks and pouring into value stocks like Coke, a better approach is to determine the role you would like dividend stocks to play in your portfolio.

For example, maybe you have a high risk tolerance and a long-term time horizon. In that case, stocks like Coca-Cola can serve as role players. However, it can play a leading role if you're a risk-averse investor focused more on passive income.