Monster Beverage's (MNST -1.06%) and Coca-Cola's (KO -0.78%) stocks outperformed the S&P 500 (^GSPC +1.54%) over the last five years, through Sept. 17. Monster Beverage saw its shares gain 88.1%, while Coca-Cola's stock produced a total return, including dividends, of 87.3%. During this time, the S&P 500 returned 85.1%.
For shareholders of both companies, that's good news. But everyone wants to forecast the future.
These beverage companies are in different stages, with Coca-Cola being the more mature company and Monster in growth mode. Examining both companies, do they offer market-beating potential over the next five years?
Image source: Getty Images.
Can Monster Beverage keep the momentum?
Monster Beverage primarily sells energy beverages, including those under the Monster Energy brand. It also sells alcoholic beverages (e.g., craft year-over-year growthbeers, flavored malt beverages, and hard seltzers).
Its products have resonated with consumers. You can see this by examining its results, which show continued strong sales growth.
NASDAQ: MNST
Key Data Points
Monster Beverage's second-quarter sales grew 17.9% year over year to $2.5 billion, adjusted to remove foreign currency translations. Still, the company has been facing cost pressure. Its adjusted diluted earnings per share increased at a lower rate, 15.2%, to $0.60. The company also faces competition in the space.
Its major business, Monster Energy drinks, drove the strong sales growth. The division saw 19.3% growth year over year to $2.3 billion.
Coca-Cola's total return potential
Coca-Cola started selling soda in 1886 and now sells an array of beverages that also include water, juice, and plant-based beverages in more than 200 countries. It's a mature company, but it's still taking market share from competitors and growing sales.
NYSE: KO
Key Data Points
Coca-Cola has been increasing sales at a steady, moderate pace. Its second-quarter top line, removing foreign currency translations and the impact of acquisitions/divestitures, increased 6% compared to a year ago. Notably, higher volume contributed 4 percentage points, with price/mix accounting for the balance. The company's earnings per share increased 9%.
While Coca-Cola isn't a high-growth company, it does provide growing dividends that add to its total return. The board of directors has raised the payout for 64 straight years, including a 4% increase this year to $0.53 per share quarterly. That makes the company a Dividend King, a designation for companies that have raised dividends for at least 50 straight years.
Coca-Cola's shares have a 2.4% dividend yield. That's more than double the S&P 500's 1.1% yield.
A peek into the future
Coca-Cola, with its well-established brands, steady sales growth, and consistently higher dividends, looks like it has the potential to beat the S&P 500 over the next five years. However, Monster Beverage faces stiff competition, and the potential for consumer tastes shifting away from energy drinks could hurt sales.
It's not always the flashiest, most exciting company that sustains long-term success. With its strong competitive position and growing dividends, I'd go with the tried-and-true Coca-Cola over Monster Beverage.
