The Coca-Cola Co (KO) is one of America’s iconic companies, and its shares have long been among the market’s most dependable. With stocks selling off sharply to begin the year, investors who are thinking of reallocating funds to more conservative holdings are surely thinking about KO once again.

For those of you wondering whether Coca-Cola may be a good option for taking shelter during this storm, let’s take a look at the pros and cons of an investment in KO today.

KO Stock Pros

Long Dividend History

Coca-Cola has a long corporate history. The product was first created more than 125 years ago, and KO stock has long been one of the nation’s best blue chip offerings. For more than fifty consecutive years, KO has increased its annual dividend. No obstacle, be it the 70s stagflation nor the 2008 financial crisis, could stop the company from continuously increasing the annual payments received by grateful shareholders.

The current dividend amounts to a 3.1% yield, well above what the S&P 500 index as a whole offers. And with a more than fifty year track record of growth, it is fairly certain that shareholders will continue to receive generous additions to that dividend as time progresses. Coca-Cola is already a mature company, so shares are unlikely to go surging higher. However, for investors interested in a stable, steadily increasing dividend payment, KO stock is a dependable choice.

Varied Brands

A long-running gripe with KO is that the company is too focused on soft drinks. With the recent negative press regarding potential ties between soda and obesity, diabetes, and other such ailments, many people are saying that Coca-Cola will suffer. This is true to some degree, in developed markets such as North America, soda sales have peaked and are starting to decline.

However, there’s more to KO than just soda. The company currently hails with 20 brands that produce one billion or more dollars of sales per year, and roughly half of these are non-carbonated. In many markets, Coca-Cola has a leading brand in water, juice, and sports drinks, in addition to soda.

Coca-Cola has the world’s most sophisticated beverage distribution system, and they are very content to sell customers healthier beverages if they so desire. Apart from the world turning to tap water exclusively (an unlikely development),  Coca-Cola will continue to bottle, brand, and distribute whatever sorts of beverages consumers of the future desire.

The new Fairlife milk brand has the potential to be another smash for KO. If you’ve seen the Greek yogurt frenzy recently, imagine the same transformation potentially coming to milk. Coca-Cola’s new offering brings a naturally less sweet, higher protein form of milk to consumers that may be just the right touch in this health-conscious age.

Buyout of Keurig Green Mountain

Finally, sometimes the best thing that can happen to a company is managing to wiggle out of a large loss. Such was Coca-Cola’s experience with Keurig Green Mountain (GMCR), makers of the famous coffee roasting machine that utilizes specialized pods.

Coca-Cola invested in that company a couple years ago, putting around $2bn into the firm. The value of that investment had fluctuated widely. In 2015, things appeared to take a turn for the worse, as the new Keurig Kold debuted to scathing reviews.

The Kold was supposed to take on the instant cold beverage prepartion market, like Sodastream (SODA), but it failed miserably. It was much too expensive, slow, and had mediocre flavor. Needless to say, Keurig shares plunged as investors expected financial issues to arise from the Kold’s failure.

Instead, Keurig ended the year by getting bought out at a massive premium to its share price. Coca-Cola, which had been down almost a billion dollars on its stake, will now exit the position with a small profit.

KO Stock Cons

Mexican Soda Tax

In the first full year after ratification, the new Mexican soda tax was shown to have produced a 6% drop in Mexican soda sales. It was a boon for non-soft drink products, with beverages such as water up 4%. Poor households were most impacted by the tax, switching to less sweet beverages at the fastest rate.

While Mexico is an important Coca-Cola market, the bigger impact is as a signal to other countries. Eager to fight their own obesity epidemics, many countries may look to Mexico’s example and consider implementing a similar tax in their local communities. Since KO generally gets better margins from soft drinks than other brands, similar legislation elsewhere would be damaging to the company’s overall profitability.

Strong US Dollar

The US dollar continues to remain at near-multi year highs. For a company that derives the majority of its revenues from overseas, that is problematic. KO has limited ability to push through price increases to offset the strong dollar, particularly as many emerging markets are seeing economic slowdowns.

To give one example, in 2011, a 20oz bottle of Coca-Cola cost about 68 cents in Mexico. Due to a falling Mexican Peso and lack of inflation  preventing price increases, that same bottle only retails at 55 cents today. That loss hits Coca Cola’s bottom line sharply. With the Fed hiking interest rates, the dollar should remain strong throughout 2016, casting a shadow on KO’s profit margins.

Relatively High Valuation

With profits held in check by the strong dollar, KO has seen its valuation become stretched. Over the past few months, shares have rallied more than 10% as investors have moved into the company seeking yield and safety. But without a corresponding rise in profits, the P/E ratio has swelled to 26, and the company doesn’t have a lot of immediate growth in store to justify the higher valuation.

The forward P/E of 20 is much better, although still slightly on the expensive side. And that forward P/E assumes that profits will jump significantly. Whether that happens remains to be seen, and in many ways is outside of the company’s direct control.

Verdict

KO stock remains an excellent conservative choice. Current investors should have no qualms about maintaining their position. However, for new buyers, the 26 P/E ratio and current business headwinds seem fairly significant. For the pros to outweigh the cons, you’d want to get a better entry price. $38 seems like a good place to put a bid.

As of this writing, Ian Bezek was long KO stock.