With the recent return of volatility in the stock market, investors have fallen back in love with sturdy consumer staples businesses -- especially the ones that pay out predictably rising dividends. PepsiCo (PEP 0.39%) has been one of those relative winners so far in 2025, with shares up slightly even as the S&P 500 index dropped 5%. Let's take a closer look at that beverage and snack food giant to see how it stacks up against its main drink rival, Coca-Cola (KO +0.28%).
Growth and outlook
Coca-Cola is the clear growth winner, despite consumers becoming more price-sensitive in the past year. Organic sales rose 14% in the most recent quarter, trouncing PepsiCo's 2% uptick. The beverage giant is projecting another solid year ahead as organic revenue expands by between 5% and 6%. PepsiCo's management team, on the other hand, forecast another year of low-single-digit revenue gains in 2025 after organic sales rose by just 2% last year.
NASDAQ: PEP
Key Data Points
Investors will be watching both companies' results for signs of inflation fatigue. That's more of a challenge for PepsiCo, though, due to its exposure to rising food ingredient prices. Its sales volume fell by 1% last quarter, compared to Coca-Cola's 2% uptick. Coca-Cola was also able to raise prices more aggressively in 2024 while keeping volume in positive territory. These factors suggest that Coca-Cola has a clearer path toward improving shareholder returns in 2025 and beyond.
Cash flow and returns
Both PepsiCo and Coca-Cola promise to reward investors with ample cash returns this year, thanks to their efficient businesses. PepsiCo is planning to spend $7.6 billion on dividends in 2025, along with $1 billion in stock buyback spending.
Coca-Cola executives also favor dividends as their main channel for cash returns. They spent $8 billion on dividend payments last year and $1.1 billion on stock buybacks. Yet PepsiCo delivers a higher yield at 3.55% today compared to Coca-Cola's 2.7% rate. Both companies hiked their dividend by the same 5% in 2025. As a result, income investors might prefer PepsiCo shares for their higher yield and attractive cash flow trends.
The price is right
You'll pay a premium to own Coca-Cola stock over PepsiCo, but the real question is whether it's worth the extra value. PepsiCo shares are trading at 18 times this year's expected earnings, compared to Coca-Cola's forward price-to-earnings (P/E) of 24. You see a similar valuation gap in terms of sales, with Pepsi trading at 2.3 times revenue to Coca-Cola's ratio of 6.5 times.
Factors supporting Coca-Cola's premium include its faster growth, as mentioned above, but also its stellar profitability. The beverage giant's operating profit margin is a blazing 30% of sales, more than double PepsiCo's 14% rate.
KO Operating Margin (TTM) data by YCharts.
The main reasons to prefer PepsiCo's stock over Coca-Cola's are its cheaper valuation and higher yield. Yet most investors will want to choose Coca-Cola for their portfolios today. Its beverage business dominates the industry, and that success shows up in pricing power, high profit margins, and faster sales growth. There's no denying the stability of its earnings power, either, as the company just announced its 63rd consecutive annual dividend increase. That payout gives Coca-Cola a prime spot in the exclusive club of Dividend Kings, or companies that have raised their dividends for at least 50 consecutive years.
It's OK to pay a higher price for such a well-performing, financially sturdy business. Coca-Cola wins this investing matchup.
