The key to global success for consumer companies is building a strong brand, and you won't find two better examples of how to go about doing that than Coca-Cola (NYSE:KO) and Philip Morris International (NYSE:PM). Their iconic Coke soft drinks and Marlboro cigarettes have enjoyed continuous popularity around the world for a long time -- and in the case of Philip Morris International, since long before it split from its U.S. parent.

Another commonality they share right now isn't as positive. Health advocates have come down hard on both for the harm their products do to consumers, and public policy has turned against them. In response, both Coca-Cola and Philip Morris have undertaken strategic shifts, but addressing their issues to any significant degree could require dramatic changes in the way they do business.

Below, I'll consider the struggles and opportunities facing Coca-Cola and Philip Morris now, with the aim of helping investors determine which stock is the better play today.

Five Coke bottles with increasing amounts of cola in them.

Image source: Coca-Cola.

Stock performance and valuation

The stock prices of both of these companies have suffered recently, but there's still a clear winner between them: Coca-Cola shares are down just 4% since June 2017, while Philip Morris has taken a much larger 35% hit over the same period.

Right now, it's hard to judge many companies based on trailing earnings, because one-time issues relating to the tax overhaul and accounting-rule changes have distorted their recent results. For instance, Coca-Cola's  earnings have been depressed substantially, giving it a misleading trailing earnings multiple of over 150. By comparison, Philip Morris looks cheap with a 20 P/E multiple.

The numbers you get when you consider future earnings estimates are a little more reliable. There too, Philip Morris keeps the edge, trading at about 14 times forward earnings compared to a forward multiple of 19 for Coca-Cola. Given the price plunge that Philip Morris stock has taken, it's not surprising that it looks like the smarter play based on valuation.

Dividends

For dividend investors, both Coca-Cola and Philip Morris are attractive, but the recent share price drop has pushed the tobacco giant's yield much higher. It now yields more than 5%, compared to a healthy but less impressive 3.5% yield for Coca-Cola.

One area where Coca-Cola still shines is in dividend growth. In March, it made its 56th straight annual dividend increase, with a 5% boost to $0.39 per share on a quarterly basis. Philip Morris has an impressive payout growth pedigree as well. Its parent, Altria, has a record of half a century of consecutive dividend increases, and since PMI spun out on its own, it too has boosted payouts annually, though the size of its increases has in the past few years diminished dramatically to a range of 2% to 3%. Coca-Cola also has a lower payout ratio -- around 75% of projected earnings this year. Overall, Philip Morris still looks slightly better from a dividend standpoint, but there are compelling reasons to consider Coca-Cola as well.

Growth prospects and risks

Both Coca-Cola and Philip Morris are trying to grow despite challenges. Coca-Cola's recent financial results have been heavily distorted due to its efforts to refranchise its bottling operations. The result has been a substantial drop in revenue, including a 16% plunge in Q1 2018 compared to the year-ago quarter. Yet when you account for those restructuring moves, organic revenue was higher by 5% on 3% growth in unit case volumes. CEO James Quincey hopes that the moves will help Coca-Cola become a more consumer-centric company. Moreover, by using its Coca-Cola brand to build out higher-demand zero-sugar beverages and introduce new flavors, the company is looking to meet changing consumer preferences. It's also focusing more on categories like sparkling water and tea, which have the potential to be growth areas. And, to the extent that its shifts can draw attention away from the negative health impacts of its core sugary beverage lines, they should have long-term benefits for the beverage giant.

Meanwhile, Philip Morris has run into challenges in its attempts to evolve. The tobacco giant wants to move away from selling traditional cigarettes, and is embracing alternatives like its heated tobacco system, iQOS. Yet in its Q1, the sales growth of iQOS in Japan took an unexpected pause, which raised fears that the adoption rate of what it asserts is a "reduced-risk" product might be a lot slower than bullish investors had hoped. At the same time, Philip Morris hasn't made much progress in its efforts to get U.S. regulators to approve iQOS for American consumers. With a lot of key questions about its future still to be answered, it's hard to feel entirely comfortable with Philip Morris' prospects.

Have a Coke and a smile

Based on this reading, Coca-Cola looks like the better buy for investors right now. Even after the big share price decline for Philip Morris, which has pushed its dividend yield commensurately higher, the uncertainties the tobacco company faces are just too big to ignore.

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.