With the current return of volatility within the inventory market, buyers have fallen again in love with sturdy shopper staples companies — particularly those that pay out predictably rising dividends. PepsiCo (PEP 0.17%) has been a kind of relative winners to this point in 2025, with shares up barely even because the S&P 500 index dropped 5%. Let’s take a more in-depth have a look at that beverage and snack meals big to see the way it stacks up towards its essential drink rival, Coca-Cola (KO 0.07%).
Progress and outlook
Coca-Cola is the clear development winner, regardless of customers turning into extra price-sensitive up to now yr. Natural gross sales rose 14% in the latest quarter, trouncing PepsiCo’s 2% uptick. The beverage big is projecting one other stable yr forward as natural income expands by between 5% and 6%. PepsiCo’s administration crew, however, forecast one other yr of low-single-digit income positive aspects in 2025 after natural gross sales rose by simply 2% final yr.
Traders can be watching each firms’ outcomes for indicators of inflation fatigue. That is extra of a problem for PepsiCo, although, because of its publicity to rising meals ingredient costs. Its gross sales quantity fell by 1% final quarter, in comparison with Coca-Cola’s 2% uptick. Coca-Cola was additionally in a position to increase costs extra aggressively in 2024 whereas protecting quantity in optimistic territory. These components counsel that Coca-Cola has a clearer path towards enhancing shareholder returns in 2025 and past.
Money movement and returns
Each PepsiCo and Coca-Cola promise to reward buyers with ample money returns this yr, because of their environment friendly companies. PepsiCo is planning to spend $7.6 billion on dividends in 2025, together with $1 billion in inventory buyback spending.
Coca-Cola executives additionally favor dividends as their essential channel for money returns. They spent $8 billion on dividend funds final yr and $1.1 billion on inventory buybacks. But PepsiCo delivers the next yield at 3.55% at the moment in comparison with Coca-Cola’s 2.7% price. Each firms hiked their dividend by the identical 5% in 2025. In consequence, revenue buyers may desire PepsiCo shares for his or her greater yield and enticing money movement tendencies.
The worth is true
You may pay a premium to personal Coca-Cola inventory over PepsiCo, however the true query is whether or not it is value the additional worth. PepsiCo shares are buying and selling at 18 instances this yr’s anticipated earnings, in comparison with Coca-Cola’s ahead price-to-earnings (P/E) of 24. You see the same valuation hole when it comes to gross sales, with Pepsi buying and selling at 2.3 instances income to Coca-Cola’s ratio of 6.5 instances.
Elements supporting Coca-Cola’s premium embody its quicker development, as talked about above, but in addition its stellar profitability. The beverage big’s working revenue margin is a blazing 30% of gross sales, greater than double PepsiCo’s 14% price.
KO Working Margin (TTM) information by YCharts.
The principle causes to desire PepsiCo’s inventory over Coca-Cola’s are its cheaper valuation and better yield. But most buyers will wish to select Coca-Cola for his or her portfolios at the moment. Its beverage enterprise dominates the business, and that success exhibits up in pricing energy, excessive revenue margins, and quicker gross sales development. There isn’t any denying the soundness of its earnings energy, both, as the corporate simply introduced its 63rd consecutive annual dividend enhance. That payout offers Coca-Cola a primary spot within the unique membership of Dividend Kings, or firms which have raised their dividends for at the very least 50 consecutive years.
It is OK to pay the next worth for such a well-performing, financially sturdy enterprise. Coca-Cola wins this investing matchup.
