Both Altria Group (NYSE:MO) and Coca-Cola (NYSE:KO) have become household names among U.S. consumers, providing products that come with high demand among their loyal customer bases. Yet both companies have also run into controversy as consumer advocates and health professionals weigh the potential harmful impact of using their products. Increasingly, sugary soft drinks are seeing some of the same sort of attention that cigarettes have gotten for decades, with looks at possible health effects leading to policy moves like taxation and regulation. With that in mind, investors want to know whether the two stocks can keep generating strong returns going forward. Let's look more closely at Altria Group and Coca-Cola, comparing them on a number of key measures to decide which one is the better buy.

Ko Bottles Big
Image source: Coca-Cola.

Stock performance and valuation

In terms of recent stock performance, Altria has a huge edge over Coca-Cola over the past 12 months. Altria has generated a total return of more than 20% since December 2015, but Coca-Cola's has seen its stock fall by 1% over the same period.

Interestingly, though, the two stocks actually have valuations that are very much in line with one another. When you look at the earnings the two companies have brought in over the past year, both Altria and Coca-Cola trade at an earnings multiple of around 25. Coca-Cola's edge is so small as to be insignificant by that measure. Moreover, expanding your view to look at near-term future earnings projections, Coca-Cola's forward earnings multiple of 21 is just a little higher than Altria, which trades closer to 20 times forward earnings. It's hard to give either stock the victory based on simple valuation measures like these.

Dividends

Among dividend stocks, both Altria Group and Coca-Cola have good reputations. In terms of current dividend yield, Altria has a small lead, with a 3.6% yield compared to Coca-Cola's corresponding figure of 3.4%. Both stocks have payout ratios near the middle of the 80% to 90% range, which is consistent with their practices of paying the bulk of their earnings to shareholders as dividends.

Moreover, dividend growth has been a high priority for Altria and Coca-Cola. Altria raised its dividend in September, with an 8% rise that extended its streak of consecutive annual dividend increases to 47 years. Along the way, Altria has made spinoffs of parts of its business, denying it the status of a Dividend Aristocrat, but dividends have been a huge part of Altria's long-term return success. For Coca-Cola, its 6% dividend increase early in 2016 extended its consecutive streak to 54 years, and the drink maker does qualify as a Dividend Aristocrat. On dividends, there are only small differences between the two stocks.

Growth prospects and risks

Neither Altria Group nor Coca-Cola will be blowout growth stocks in the future, given their mature markets and large size. However, both companies are looking at growth initiatives that should help them sustain their general upward trajectory. For Altria, sales and adjusted earnings gains were solid, and although cigarette shipment volume remained under pressure, the remainder of Altria's businesses contribute more toward growth. Altria has also picked up a greater than 10% stake in Anheuser-Busch InBev (NYSE:BUD) as a result of its merger with fellow beer giant SABMiller, in which Altria had a sizable position. Altria didn't make any adjustments to its guidance for the full year, and it believes that it will still be able to grow earnings by high-single-digit percentages even with an end to some of the tailwinds that helped promote product sales growth, including the bounce in gasoline prices. Of interest will be promotion of reduced-risk products, which could be a major game changer in the industry.

Meanwhile, for Coca-Cola, recent results have looked a bit uglier. In its most recent report, revenue slumped 7%, sending net income down by 30%. But most of that downward pressure came from the realignment of its bottling operations, and the company said that organic revenue was up 3% from the year-ago quarter. Nevertheless, that's down from its previous full-year growth projections of 4% to 5%, and of particular concern has been flat unit case volume performance in the sparkling carbonated beverage arena. A change in leadership at the top will see the departure of CEO Muhtar Kent, with James Quincey taking over next May. Its strategy is likely to remain moving itself away from sugary soft drinks toward still beverages, which have performed much better. But that will take time to implement.

Both Altria Group and Coca-Cola have similar growth prospects, dividends, and valuations. Based on that, a lot depends on where you see each company in their respective strategic plans. If you think that cigarette alternatives will catch on more quickly than tea, juice, and other still beverages, then Altria has an edge. But with Coca-Cola shares having underperformed, any rebound could send its stock more sharply higher than the tobacco giant's share price.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.