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Sometimes when choosing dividend stocks to invest in, the supposedly "boring" big blue-chip companies can actually be the most exciting and lucrative way to go. For example, an investment in Exxon Mobil (NYSE:XOM) made three decades ago has appreciated by more than 3000%, assuming all dividends were reinvested. One of the world's most recognizable brands, Coca-Cola (NYSE:KO), is a perfect example of this. Despite a relatively modest 3% annual yield and low volatility, Coca-Cola can produce massive gains over the long run due to steady performance, reinvestment of and raises to the dividend that can rival pretty much any other strategy.

Coca-Cola in 2013

Most people know Coca-Cola for its soft drinks, but most people who don't follow the company aren't aware of just how diverse its product line has become. In addition to the Coke, Diet Coke, Sprite, and other soft drinks, the company's product portfolio also contains such brands as Powerade, Full Throttle, Dasani water, and Minute Maid juices, just to name a few.

The company also has a tremendous international presence that still has some room for growth, particularly in the emerging markets around the world. Currently, North American beverage sales account for about 45% of the company's revenue, with Europe, Asia, and Latin America each accounting for about 10% of total revenues or about $5 billion annually from each region. A relatively small presence in Africa (6% of revenues) and the company's investments in bottling operations make up the rest.

Trends in the industry have been somewhat away from the carbonated soft drinks, at least in the U.S., and Coca-Cola has taken steps to strengthen its other brands, particularly Powerade, Minute Maid and Dasani. The company has made several smaller but effective acquisitions over the past several years, including Glaceau (Vitamin Water), Great Plains (Honest Tea), and several other overseas brands of juices and teas that aren't well-known to U.S. consumers.

Historical trends, and will they continue?

Since its founding, Coca-Cola has established one of the best track records in the market of steady performance and dividend increases. While shares have just about quadrupled over the past two decades, the real story is Coca-Cola's dividend, which has risen by over 500% from 4.3 cents per share quarterly to today's 28 cent quarterly payments. Even more impressive than the overall increase is the consistency with which it occurred over time:

(click to enlarge)

So, throughout the past two decades, Coca-Cola raised its dividend by an average of 10% per year on an extremely consistent basis, even during the height of two recessions. Since the company's dividend represents a payout ratio of just over 50%, there should be no issue continuing raises for the foreseeable future.

Let's examine what a hypothetical investment in the company would do over a 30-year time period. It is a pretty fair assumption that the dividend raises will continue. It is also fair and reasonable to assume that the share price will continue to increase by 6.4% annually, which is the company's historical average. Assuming that all dividends are reinvested, this means that a $10,000 investment in Coca-Cola today would grow to $267,821 after a 30-year period. Not so boring anymore, is it?

Summary

Regardless of whether you employ the above strategy in your own portfolio, Coca-Cola is an excellent investment for your future. That 3% annual yield will look a lot better in a few decades after being raised each year, and you can bet that the company will continue to add shareholder value by increasing revenues and completing share buybacks. When it comes to income investing, steady and predictable wins the race, and this is an excellent addition to a portfolio with those goals in mind.

The safety and predictability of Coca-Cola, not to mention the consistent performance of the company, make it a far better alternative for the low-risk parts of your portfolio (like your retirement holdings) than trying to pick the "next big thing." Sometimes the "old" big things are just what you need!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Coca-Cola: Sometimes You Can't Beat A Classic