In my previous articles on Coca-Cola (NYSE:KO) (link) and PepsiCo (NYSE:PEP) (link) I analyzed both companies' dividends, dividend growth and stock buyback records. I also took a look at their EPS and revenue growth. I finally ended with an examination of their debt levels. I will now take a look at both side by side to see which of these two dividend champions is the better investment choice.
First, a note on PepsiCo. PepsiCo currently sells a large amount of non beverage food items. This group includes brands such as Frito-Lay and Quaker Oats. Please bear in mind that this is a faster growing sector and is considered the "crown jewels" for PepsiCo. Coca-Cola is more of a pure play beverage company, with substantially all its income derived from its namesake brand and similar beverages.
Let us start with a look at the TTM P/E ratios for both companies over the last 5 years:
We can see that Pepsico has traded at a lower P/E than Coca-Cola for most of the 5 years. However, Coca-Cola did trade at a lower P/E in 2011. This can be explained due to a large debt refinancing Coca-Cola made that year due to an acquisition which resulted in large non cash EPS gains. Pepsico has a cheaper P/E, but not by much.
TTM Net Income
Let us now look at TTM net income for both companies:
We can see that Coca-Cola has grown its income at a much faster pace than Pepsico. This is a clear win for Coca-Cola.
Now, let us see how both companies match up on TTM revenue:
Both companies have been able to grow revenue over the last 5 years. However, Coca-Cola has been able to grow it more consistently and faster. Pepsico has also not been able to grow revenue this year. The winner here is Coca-Cola.
Let us now look at the historic dividend yield for both companies:
As we can see, Pepsico has historically traded at a lower yield than Coca-Cola. However, due to its slower growth rate, Pepsico now trades with a higher yield. Pepsi wins this round, but not in a good way.
Dividend Growth Rate
Let us now look at the dividend growth rate over the last 5 years:
As we can see, Coca-Cola beats Pepsico in dividend growth. Pepsico's dividend growth has been in decline during the last 5 years, while Coca-Cola's has held steady. The average for Pepsico over this time frame was 7.52% and for Coca-Cola 8.44%. Coca-Cola is a clear winner here.
Finally, let us look at the balance sheets for both companies:
Not only does Pepsico have more debt than Coca-Cola, but it also has less cash. Coca-Cola is a much better balance sheet than Pepsico, even managing to have more cash on hand than debt during much of this time frame. Coca-Cola is a clear winner.
Now, here is the final tally:
TTM P/E: Pepsico wins
TTM Net Income: Coca-Cola wins
TTM Revenue: Coca-Cola wins
Dividend Yield: Pepsico wins
Dividend Growth: Coca-Cola wins
Balance Sheet: Coca-Cola wins
I think we can proclaim Coca-Cola a clear winner in this match up. Coke has grown its income and dividend much faster than Pepsi. Pepsi has lagged behind, hence the lower P/E and higher dividend yield. Pepsi has also added more debt than Coca-Cola without much to show for it in terms of earnings.