Coca-Cola (NYSE:KO) is one of those classic blue-chip stocks your grandpa would swear by, and honestly, he's not wrong. The company has been around for over a century, pays a steady dividend, and has less volatility than the broader market. It's the definition of a "sleep-well-at-night" stock.

That said, you shouldn't base your investment decisions on nostalgia alone. Before you buy, here are three essential things you need to know about Coca-Cola stock.

The Coca-Cola system

What keeps Coca-Cola running strong after more than a century is its unique business model, famously called the "Coca-Cola system." Here's how it works.

The Coca-Cola Company focuses on marketing, manufacturing, and selling two core products: beverage concentrates and syrups, as well as finished beverages. These concentrates and syrups are sold to authorized bottling partners, who are the real muscle behind Coca-Cola's global reach.

Each territory typically has a major bottling partner with exclusive contracts. These partners mix the concentrates with water and sweeteners, then package, sell, and distribute the beverages to retailers. Coca-Cola's Bottling Investment Group also provides support where needed.

This setup is a key reason behind Coca-Cola's impressive profitability. The company's profit margin sits at 22.45%, and its operating margin is 30.24%. Contrast this with usual low-margin retailers.

By focusing on high-margin concentrate production and outsourcing the capital-intensive bottling and distribution, Coca-Cola achieves efficiency and resilience. Even in challenging economic conditions, the system allows the company to maintain its global presence and competitive edge.

Shareholder-friendly policies

Besides steadily growing earnings by selling more drinks in more and more geographies, Coca-Cola also prioritizes returning capital to its shareholders in two major ways: dividends and share splits.

As of December 11, Coca-Cola currently offers a 3.08% dividend yield with a 79.46% payout ratio. While the yield itself is attractive, it's the growth trajectory that stands out.

Coca-Cola has increased its dividend every year for 62 consecutive years, earning its place as a Dividend King. This means shareholders have enjoyed not only consistent income but also rising payouts year after year.

On top of dividends, Coca-Cola has a long history of stock splits. Whenever its share price gets too high, the company opts for splits to make the stock more accessible to retail investors.

In fact, Coca-Cola has split its shares 11 times since it went public. To put that in perspective, a single share purchased in 1919 would have grown into 9,216 shares by 2012.

Lower volatility

On average, Coca-Cola's share price fluctuates less than the broader market. It has a five-year beta of 0.62, compared to the market's beta of one.

This means that historically, Coca-Cola's stock has been 38% less volatile than the overall market. For example, if the market moves up or down by 1%, Coca-Cola's stock would typically move by about 0.62%.

Coca-Cola's lower beta stems from a combination of factors. Its earnings are remarkably consistent, thanks to steady revenue from beverage sales worldwide, which remain in demand regardless of economic conditions.

High profit and operating margins also provide a financial buffer, ensuring the company remains profitable even during economic downturns.

Additionally, Coca-Cola's focus on durable consumer staples—products that people purchase regularly—across multiple geographic markets contributes to its stability.

Together, these elements help Coca-Cola maintain less-volatile stock performance than the broader market. If you want lower risk yet solid total returns, Coca-Cola might be the right stock for you.