Coca-Cola vs Pepsi

Coca-Cola (KO) vs. Pepsi (PEP) Stock: Dividend Aristocrat Matchup

Paying a dividend, and raising it over time, is a commitment to paying out capital to shareholders through the economic cycle. Therefore, it is usually much easier to raise the dividend during periods of economic expansion than during a recession. Some companies, like Coca-Cola (KO) vs. Pepsi (PEP) stock have characteristics that let them do this.

Companies in the consumer staples sector are often in the envious position of increasing their dividends as these names sell items that consumers seek out throughout all phases of the economic cycle. 

This advantage can provide steady revenue and earnings growth rates, enabling the companies to raise their dividends for long periods. This reason is why consumer staples make up nearly a quarter of the 65 Dividend Aristocrats

This article will look at two of our favorite names in the space, the Coca-Cola Company (KO) and PepsiCo, Inc. (PEP). We conduct a comparative analysis of KO vs. PEP stock.


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Coca-Cola (KO) vs. Pepsi (PEP) Stock

The Coca-Cola Company

With a presence in more than 200 countries worldwide, Coca-Cola has the size, scale, and reach that few companies have. The company’s product portfolio consists of more than 400 non-alcoholic brands. Consumers drink these an average of 2 billion times per day. The firm had almost $39 billion in annual sales in 2021 and more than $42 billion in the last twelve months. The market capitalization is approximately $264 billion.

While Coca-Cola’s product portfolio is immense, the company’s top brands provide the bulk of revenues. The company has 20 different brands that bring in at least $1 billion of annual revenue. The company is widely known for its carbonated beverages, as Coke is the top-selling non-alcoholic beverage globally. Other names, such as Diet Coke, Fanta, Dasani, and Sprite, are also very popular.

Coca-Cola Brands
Source: Coca-Cola Q3 2022 Investor Presentation

Given the top-heaviness of the company’s portfolio, Coca-Cola embarked upon a brand optimization endeavor. The company eliminated half of the names in its current portfolio as it right sizes its product lines. While this effort appears grand, doing so will reduce annual volumes by ~2% and revenues by ~1%. Clearly, Coca-Cola carries brands that aren’t all that important to its business.

As it has been said many times, consumers’ tastes change as they become more conscious about the food and drink they consume. This fact is especially true of developed markets. For example, the U.S. has experienced a decline in soda consumption for several years. To offset this, Coca-Cola has launched several healthier versions of its soda mainstays, such as Coca-Cola Zero, to attract these types of consumers.


But Coca-Cola is more than just a soda company. Its juice business, including Minute Maid and Simply, also tops the $1 billion revenue mark. Interestingly, Coca-Cola launched Minute Maid Pulpy in China in 2005, and the product line reached a billion-dollar status in just five years. This success shows the appeal of the products as well as the benefits of a country-specific product. Coca-Cola also has water, energy, coffee & tea, and sports drinks that resonate with consumers. 

Coca-Cola also took action to divest its bottling operations over the years. While this impacted the top-line figure, the company did so to improve its profit margin. As a result, comparing KO vs. PEP stock, the former has higher operating margins.

The beverage giant is expanding its platforms by growing Simply, ready-to-drink juices; Ayataka, the fastest-growing tea brand in Japan; and AHA. In addition, recent acquisitions of BodyArmor, sports drinks; Costa, RTD coffees; and fairlife provide pathways for future growth. Furthermore, strategic partnerships have brought Topo Chico Hard Seltzer and Fresca Mixed into the fold. Although Coca-Cola is immense, it has only a 14% volume share in developed markets and an even lower 6% volume share in developing & emerging markets.

Coca-Cola Brands Growth
Source: Coca-Cola Q3 2022 Investor Presentation

Coca-Cola does face some challenges, such as lower soda consumption, but the company does have several significant tailwinds. Its products’ popularity and global reach are impressive and almost impossible to replicate. Coca-Cola is the worldwide leader in non-alcoholic beverages. The company trimmed its product portfolio to focus on its top brands, has many product lines that bring in more than $1 billion in annual revenues, and is adding platforms.

Dividend Analysis

These are just some of the reasons why we feel that Coca-Cola’s dividend growth streak of 60 years is likely to continue. Moreover, Coca-Cola has paid its dividend for 100+ years

The Dividend King has raised the dividend at a roughly 3.7% rate in the past five years because of the high payout ratio of ~72%. However, income investors may be attracted to the stock’s 2.84% dividend yield, which is more than twice that of the average dividend yield of the S&P 500 Index.

Related Article About Coca-Cols (KO) on Dividend Power

Portfolio Insight - Dividend Growth KO
Source: Portfolio Insight*


PepsiCo’s size and scale are as impressive as its top rival, with 500+ brands and sales worldwide in more than 200 countries. The company is valued at about $253 billion. It had annual revenues greater than $79 billion in 2021 and almost $84 billion in the past twelve months.

PepsiCo also possesses a portfolio of brands, as the company has 23 products that bring in more than $1 billion in sales annually. Many might not know that PepsiCo generates more than half of its sales from food and snack. Top-selling products in these categories include Lay’s, Doritos, Cheetos, and Tostitos. 

However, the company is probably best known for its non-alcoholic beverages, including Pepsi, Diet Pepsi, Mountain Dew, Gatorade, Aquafina, and Sierra Mist. Each of these brands enjoys widespread popularity and loyalty amongst consumers. In addition, PepsiCo owns Quaker Oats.

PepsiCo Brands
Source: PepsiCo Investor Relations

Like Coca-Cola, PepsiCo is also challenged by changing consumer tastes. However, the company has been very proactive in addressing such needs. For example, approximately half of the annual sales come from the company’s “Better For you” products, which have less than 70 calories from added sugar.


PepsiCo has also made an effort to diversify away from just carbonated beverages. The company’s top-selling sports drink, Gatorade, continues to take market share. Its teas and coffees, including Lipton and Starbucks ready-to-drink beverages, are also among the best-selling in their respective categories. The firm also sells Tropicana orange juices and Naked and Brisk teas.

PepsiCo also weathered the COVID-19 pandemic reasonably well. Part of this was due to robust gains seen in the stay-at-home and eat-at-home transition that took place due to social distancing restrictions. Quaker Foods, in particular, saw sharp increases in demand as consumers were forced to spend more time and eat more meals at home. Quaker Foods also houses more of the healthier options in the portfolio and is the only non-chip billion-dollar food and snack brand that PepsiCo has.

The company’s emerging market business will be one of PepsiCo’s top growth drivers as we advance. While the North American business has generally seen low to mid-single-digit growth, the emerging markets expect higher growth rates. Comparing KO vs. PEP stock, the latter has less presence overseas and derives a lower percentage of sales from developing and emerging markets.

PepsiCo Geographic Mix
Source: PepsiCo Investor Relations

In an effort to boost its profit margins, PepsiCo sold its Tropicana, Naked, and other juice brands to PAI Partners in a joint venture. The deal netted the company $3.3 billion in cash while also giving PepsiCo a 39% ownership stake in the new JV, and the brands are still sold through PepsiCo’s distribution network.

At the same time, the firm is acquiring brands to address strategic gaps. It has added Rockstar, Pioneer Foods, Sodastream, Muscle Milk, BFY, and bare.

Dividend Analysis

PepsiCo has an excellent dividend growth track record of its own, as shareholders have received a higher dividend for 50 consecutive years, making it a new Dividend King, Dividend Champion, and Dividend Aristocrat. The stock offers a yield of 2.49% today, backed by an approximately 68% payout ratio. In addition, the dividend growth rate is higher for PEP vs. KO at about 7.5% in the trailing five years.

Portfolio Insight - Dividend Growth PEP
Source: Portfolio Insight*

As with Coca-Cola, PepsiCo has several key advantages, namely an impressive lineup of $1 billion+ brands and some of the same challenges, including a more health-conscious consumer. However, PepsiCo differs because it has a much more diversified business, given the strength of its food and snack portfolio. This gives the company a greater potential customer pool and protects if one business experiences roadblocks. Investors looking for a more diverse consumer staple name should consider buying PepsiCo.

Related Articles About Pepsi (PEP) on Dividend Power

Bottom Line in the Matchup Between KO vs. PEP Stock

Both stocks are outstanding ones for investors following a dividend growth strategy or income strategy. Dividends matter, especially for companies like these. But they are performing well during a period of high inflation, rising interest rates, and recession fear. Consequently, their valuations are elevated. When the valuation is correct, investors can choose Coca-Cola or PepsiCo.

Disclosure: Members of the Sure Dividend team are long KO and PEP.

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Nathan Parsh

Nathan Parsh written about investing, with a focus on dividend growth investing, since 2016. He currently writes for GuruFocus and has written for Seeking Alpha in the past. He is a member of Sure Dividend team since 2018.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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