International Business Machines (NYSE:IBM) and Coca-Cola (NYSE:KO) don't have a lot in common in terms of their business exposure, but they both share several desirable characteristics. You'll find both of them among the 30 stocks in the Dow Jones Industrials (DJINDICES:^DJI), and both have a reputation for having blue-chip businesses with long histories of good returns. Yet both companies also face some unique challenges currently, and they'll have to overcome substantial obstacles if they want to retain their status as high-quality companies.

If you want to know which of these two stocks is a smarter pick right now, looking at key metrics is your best method of comparison.

Stock performance and valuation

IBM and Coca-Cola have moved in opposite directions over the past year. IBM is down about 6% from where it traded in September 2016, but Coca-Cola's shares have picked up 9% over the same time frame.

Even a 15 percentage point spread in one-year performance isn't enough to explain the huge valuation differences between the two stocks. IBM trades at value-stock levels, with a trailing earnings multiple of just 12. That compares to Coca-Cola's levels of nearly 50 times trailing earnings. It's true that Coca-Cola's recent figures include some one-time charges related to strategic moves that it made with its bottling business. Yet even when you take out those impacts and look at future prospects, IBM trades at about 11 times forward earnings estimates, compared to more than twice that for Coca-Cola. On a pure valuation basis, Big Blue has a huge advantage over the beverage giant.

IBM infographic about cloud computing growth.

Image source: IBM.

Dividends

For dividend investors, IBM and Coca-Cola are both solid contenders, but the tech giant once again takes the prize in terms of current yield. IBM's dividend yield comes in at 4.1%, compared to 3.2% for the soft-drink company.

Things look a bit different when you focus on dividend growth. Coca-Cola has a long history of boosting its dividend each and every year, with the company making its 55th straight increase earlier in 2017 by making a 6% boost. IBM has a shorter streak of just 22 years of consecutive dividend increases, with a 7% rise in May bringing its quarterly payout to $1.50 per share. Coca-Cola's payout ratio is currently above 100%, but if earnings recover as expected, then that figure will fall to around 75% in the near future. Nevertheless, that's still lower than IBM's figure of less than 50%, suggesting more sustainability in the tech company's quarterly payouts.

Growth prospects and risks

Both IBM and Coca-Cola face long-term challenges. For IBM, sales have been weak, and the company's second-quarter top-line decline of nearly 5% continued a streak of 21 declines in year-over-year sales that has weighed on investor sentiment for more than five years. Big Blue has done a good job of making more from less, and adjusted earnings grew and managed to exceed expectations. Yet even though IBM has identified core areas like data analytics, cloud computing, and technology security for further growth, extremely strong competition will continue to weigh on its ability to execute well and take market share away from its rivals.

Coca-Cola has seen even uglier results, but the divestitures of its bottling business have created some distortions that make things look worse than they actually are. In its most recent quarter, net revenue plunged 16%, but organic revenue gained 3% on strength in product pricing. Expansions in adjusted operating margin reflect the efforts that Coca-Cola is making to improve internal efficiency and ensure that it doesn't lose profit unnecessarily. To respond to negative criticism of its sugary beverages, Coca-Cola has said that it will expand its low-sugar and no-sugar offerings in the sparkling drink category. Despite the short-term pain, Coca-Cola's strategic efforts are moving forward, and investors are optimistic that they'll pay off in the long run.

Overall, IBM offers the better prospects right now. Even though its growth path isn't certain, IBM carries a greater margin of safety in its valuation and pays a higher dividend. Nevertheless, both IBM and Coca-Cola need to make good on their promises to reinvent themselves if they want to remain relevant blue-chip stocks in the decades to come.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.