Want $1,000 in Dividend Income? Here's How Much You Have to Invest in Coca-Cola Stock

Coca-Cola (NYSE: KO) is a classic example of a great dividend stock. It's a dividend king , as it has raised its dividend annually for the past 62 years, under all kinds of circumstances. It's one of Warren Buffett's favorite stocks, with the dividend as a prime factor.

Let's see how much you'd have to invest in Coca-Cola stock to make $1,000 in dividends every year.

High, steady, and growing

Coca-Cola has earned its reputation over time by giving dividend investors everything they'd want in a dividend stock. It has paid, and raised, a generous dividend for well over half a century. Considering all the things that have happened over that time, including several financial crises and a global pandemic, that's an incredible track record.

Master investor Warren Buffett loves dividends because they indicate several positive qualities about a company, including a commitment to shareholder value and a large stash of cash. Coca-Cola's payout ratio is usually around 75%, which means it pays out 75% of its earnings as dividends. It keeps the remaining money to operate the business, buy back shares, and build its cash reserves.

Coke's dividend typically yields around 3%, which today is more than double the S&P 500 average. It currently pays $0.485 per share quarterly, adding up to an annual dividend of $1.94. To earn $1,000 in total dividends this year, you'd need to own 516 shares, which will cost you $32,905 at today's price.

Keep in mind that the dividend you get per share increases annually. If you invest this year, you'll get more than $1,000 next year, and it will compound over time. Investing in Coca-Cola stock isn't only about the dividend. Even if you don't reinvest the dividend but use it for passive income, Coca-Cola stock will appreciate over time. Although it's underperforming the market this year, the stock has gained 8% year-to-date without the dividend. If you do reinvest the dividend, you'll increase your base investment and get even more dividend income in the future.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .