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Investors have done well over the years owning either of Warren Buffett favorites Coca Cola (NYSE:KO) or Pepsi (NYSE:PEP). The leading beverage manufacturers offer value to customers along with growth and high dividend yields to investors. Strong free cash flow has allowed both well-managed companies increase payouts throughout the last decade. KO, however, is the better pick between the two for the following reasons:

1. Performance: KO is within 1% of post-1998 highs made earlier this year. PEP, on the other hand, remains over 10% below levels reached in 2007 and 2% off 2011 highs. KO has nearly doubled since bottoming in March 2009 while PEP hasn't quite risen by 50%.

2. Leadership: Nobody in the world sells more beverages than Coca Cola. It's been that way for over half a century and doesn't appear to be changing anytime soon.

3. Focus: Diversification is great defense. When you manufacture the single most demanded, and fastest growing in terms of quantity purchased, consumer discretionary product in the world, however, diversification is the devil. Investors looking for a true defensive growth stock must appreciate streamlined economies of scale and constant evolutionary focus, both offered on an unrivaled basis by KO.

4. Value: With a trailing P/E under 14 compared to PEP at over 18, KO appears cheaper at first glance. Margins are superior due to aforementioned focus, while Pepsi also manufactures less profitable Frito Lay, Quaker Foods and other brands. Aggressive expansion into emerging markets, including ongoing acquisition of Russian food company Wimm-Bill'-Dann (NYSE:WBD), shows prioritization of top line growth. Coca Cola, meanwhile, sustains growth in revenues and profits with lower debt and organic global integration.

5. Yield: Based on an expected recent dividend hike, PEP currently offers a slightly higher annual yield than KO -- at 2.9% vs 2.75%. At the end of 2011 it will be Coca Cola's turn to make a long-standing annual payout increase, expectedly from 47 cents quarterly to 50 or more, making the yield comparison favorable in addition to metrics discussed above. For the long term yield appears fairly equal, but is better afforded by less leveraged and more profitable KO.

Source: 5 Reasons to Own Shares of Coca Cola Rather Than Pepsi