Key Points
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In its most recent quarter, Coca-Cola delivered 10% organic revenue growth.
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PepsiCo yields about 4.1% and trades at roughly 17 times forward earnings, ahead of its July 9 report.
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The two companies have raised their dividends for 64 and 54 consecutive years, respectively.
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The market has rendered a split verdict on the two most famous names in the beverage aisle. Coca-Cola (NYSE: KO) closed Thursday at a record $84.14, and has climbed about 20% in 2026. PepsiCo (NASDAQ: PEP), meanwhile, sits about 16% below its own 52-week high, even after a bounce of its own last week.
For dividend investors, that divergence sets up a classic choice: pay up for the one that’s executing, or collect a fatter yield from the one the market doubts — right before it gets a chance to answer those doubts, with its second-quarter report due Thursday, July 9.
Coca-Cola: executing, and priced like it
Coca-Cola has earned its record. In the first quarter, organic revenue grew 10%, driven by an 8% increase in concentrate sales (though the quarter was notably flattered a bit by six additional days on the calendar compared to the year-ago period) and comparable earnings per share rose 18% to $0.86. For a beverage company founded in 1886, those are robust numbers, and they explain why investors hiding from this year’s tech volatility have crowded into the stock.
The company also extended one of the market’s great dividend streaks in February, raising its payout for a 64th consecutive year. The quarterly dividend now sits at $0.53 per share, good for a yield of about 2.5% at the current price.
But there’s a steep price of admission to get into this steady growth story. Coca-Cola now trades at about 26 times forward earnings — even though management’s full-year outlook calls for organic revenue growth of 4% to 5%. The first quarter ran well ahead of the company’s own plan for the year. And a premium built during a defensive rotation can deflate once the anxiety that fueled it fades. That said, nothing in the results indicates that the business is slowing. The question is simply whether investors are overpaying.
PepsiCo: cheaper, slower, and about to show its hand
PepsiCo’s year has looked nothing like its rival’s. The stock trades around $144 as of this writing, about 16% below its 52-week high of $171.48, and its recent results explain the discount. First-quarter organic revenue rose just 2.6% — a fraction of Coca-Cola’s pace, and full-year guidance calls for organic growth of 2% to 4%.
But the quarter arguably carried an underappreciated detail. PepsiCo’s North American food business — the source of most of the market’s worry after being a drag on the business — delivered volume growth in Q1, showing signs of a recovery. Management credited innovation and affordability initiatives. If that progress reappears in Thursday’s report, the bear case won’t look as strong.
Meanwhile, the compensation for shareholders waiting around for an inflection in Pepsi’s business is substantial. PepsiCo raised its dividend 4% this year, to $5.92 per share annually — its 54th consecutive annual increase. At the current price, that’s a yield of about 4.1%, well above Coca-Cola’s 2.5%. And the stock trades at roughly 17 times forward earnings, a wide discount to its rival’s 26 times.
Which dividend giant is the better buy?
Coca-Cola is the better business right now. Its growth is faster, its execution stronger, and its momentum obvious. But better business isn’t automatically a better stock, and the valuation gap between these two has widened beyond the gap between the businesses themselves.
PepsiCo investors collect a 4.1% yield while they wait for a turnaround that showed early signs last quarter. Coca-Cola investors collect 2.5% and a valuation that assumes the good news continues indefinitely. Even if PepsiCo merely muddles along at the low end of its guidance, the yield gap and the nine-point difference in forward multiples offer a margin of safety that a record-high price can’t.
So my pick is PepsiCo. One caveat: with earnings due on July 9, buying beforehand means accepting the risk that a weak report could make the stock cheaper still. So any investors buying the stock should do so not as a bet on how shares will react after the quarterly update but rather on the basis of its long-term prospects.
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Daniel Sparks and his clients have 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.
