Coca Cola (NYSE:KO) Full-year 2025 earnings were just announced. Organic sales are up 5% this year, which is pretty strong considering the industry headwinds.
Still, consumers’ shift toward healthier foods and belt-tightening have led the company to forecast growth of 4% to 5% in 2026. Investors weren’t happy about this, and the stock sold off. There are better bargains out there.
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For conservative income investors, Dividend King Coca-Cola is a great choice. Dividends have increased every year for over sixty years, and the P/E ratio is just below the five-year average, so the risk/reward balance isn’t bad. However, you can do better than Coca-Cola’s 2.7% dividend yield Pepsi (NASDAQ:PEP).
With a yield of 3.4%, PepsiCo is also a dividend king, with more than 50 years of annual dividend growth. Like Coca-Cola, PepsiCo is one of the largest consumer products companies in the world. The two companies compete head-on in the beverage space. Despite this, PepsiCo’s organic sales will grow only 1.7% in 2025. It’s feeling pushback from the industry to a greater extent.
PepsiCo’s price-to-earnings ratio is slightly above its five-year average, but its dividend yield is near the high end of its historical range. Supporting this value proposition is the fact that PepsiCo’s price-to-sales, price-to-book, and price-to-earnings ratios are all below their five-year averages. The yield is 0.7 percentage points higher than Coca-Cola’s, which is equivalent to 25% more income in your pocket.
In the grand scheme of things, Pepsi looks cheaper than Coca-Cola. There’s a reason for this, given the weaker operating results. Part of the reason, however, is that PepsiCo’s business extends far beyond beverages, including salty snacks and packaged foods. This diversification is a headwind today, but in the long run it provides the company with more growth opportunities.
PepsiCo expects organic sales to grow 2% to 4% in 2026. So while PepsiCo’s projected organic sales growth range will improve from its 2025 results, it will still lag behind Coca-Cola for some time.
However, higher yields compensate for slower organic growth rates. If you’re thinking in terms of decades rather than days, the opportunity to turn a profit is even more important. PepsiCo’s stock price remains 15% below its all-time high, while Coca-Cola’s stock price is only a few percentage points below its all-time high.
