If you have an investment portfolio, it's very likely that you hold one or both of these names. Not only are they two of the most powerful brands in the world, but they've also proved to be terrific investments over the years. I did this exercise a few years ago and ended up going for Pepsi (NYSE:PEP) while others (including Warren Buffett's Berkshire) have preferred to own Coca-Cola (NYSE:KO). I do currently own some PEP stock in the Ultimate Sustainable Dividend Portfolio, and it has done well over the years. Just to compare, here are the charts of the past 2-3 years:
KO data by YCharts
KO has clearly been the best name to hold in the past few years. Time for a change? Let's take a look using the top 20 things I look at when judging dividend stocks:
KO Dividend data by YCharts
While you could certainly argue that they are almost identical, the truth is that Coca-Cola has been more consistent in growing its dividend, making it the logical choice.
Again, it's very close between the two. Pepsi has slightly better sales growth over 5 years, and return on equity. I'd still give the hand to Coca-Cola though, as the sales growth is more steady, it's trading at a slightly better P/E ratio, etc. The bigger point is that growth just seems more steady, which is something I'm a fan of.
Both Pepsi and Coca-Cola have very similar offerings and products of course. They have steady market share, and while they always face local competition in different segments, there is very little threat to their overall businesses. One challenge is the strong trend towards a more healthy lifestyle. While they do offer more "healthy products" than they did a few decades ago, those face tougher competition and smaller margins.
In terms of opportunities, it's clear that the focus for both remains on emerging markets where there is still much more growth potential. They each have their strengths and weaknesses in that regard, but I don't think one is significantly better positioned than the other.
Fit Within Portfolio
Clearly, it makes sense to own at least 1 of these names as they are strong, extremely diversified products that do well no matter how the economy performs. I'd have to say that KO has not only performed better, but also looks like a stronger pick at these levels. I'm not 100% sure yet, but it's very possible that I will end up either adding KO to the USDP or switching it instead of PEP. I'll hopefully decide very soon and will keep you posted, of course.