Coca-Cola vs. PepsiCo: Which Stock Is the Better Buy?

Key Points

Coca-Cola is now growing faster and has historically generated higher total returns.

PepsiCo offers a higher-yielding dividend than Coca-Cola.

• 10 stocks we like better than Coca-Cola ›

Both Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) recently released earnings. The beverage conglomerates reported that sales rebounded as consumers shifted back to their flagship cola products and ancillary products like coffee, tea, and bottled water.

The increase in net revenue for each company may spark renewed interest in these stocks, likely prompting questions about which beverage giant's stock is the better buy. Nonetheless, the decision about which stock to buy may depend on one's investment goals, and here's why.

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Similarities and differences

First, investors should remember that both companies are more than their respective flagship colas. Both own numerous brands, including bottled water, coffee, tea, other soft drinks, and a few alcoholic beverages. PepsiCo differs in that it also owns food brands, giving it some diversity away from drinks.

Both have adapted products to better suit today's consumer tastes, leading to accelerated growth. In 2025, each company increased its net revenue by 2% yearly. Still, Coca-Cola seems to have the edge here, as its net revenue grew by 12% year over year in the latest quarter, compared to the 9% increase for PepsiCo.

Coca-Cola also stood out in terms of total returns. Total returns are up more than 60% over the last five years for Coca-Cola versus just 25% for PepsiCo. Still, investors should note that both stocks fell short of the S&P 500's total return during that period.

Moreover, Coca-Cola is not a clear standout in every respect. Former Berkshire Hathaway CEO Warren Buffett famously acquired 400 million shares (split adjusted) of Coca-Cola in the 1980s and 1990s. However, Berkshire has not purchased additional shares since 1994, choosing to collect what is now an $848 million annual income stream from an original $1.3 billion investment.

With regard to dividends, Coca-Cola has raised its dividend for 64 years, more than PepsiCo's 54 years. Thus, both are Dividend Kings by virtue of increasing dividends annually for more than 50 years. As a Dividend King, payout hikes help form each company's reputation, so the pressure not to disappoint investors makes continued annual dividend increases a near certainty.

Despite that situation, PepsiCo has the edge in income generation. Its $5.69-per-share annual dividend yields 3.6%, well above Coca-Cola's $2.12-per-share yearly payout, which yields less than 2.6%.

Finally, PepsiCo also has a slight advantage in terms of valuation. It sells for under 25 times earnings, just below Coca-Cola's 26 price-to-earnings (P/E) ratio. Still, since the S&P 500's average P/E ratio now stands at 31, most investors may ignore that modest difference, concluding that both trade at a discount to the market.

Coca-Cola or PepsiCo?

Ultimately, since Coca-Cola and PepsiCo underperformed the S&P 500, Coca-Cola's relative outperformance is arguably a moot point, and neither stock is likely the best choice. Nonetheless, if investing for income exclusively, PepsiCo has the edge.

Although Coca-Cola is a rock-solid dividend stock, PepsiCo offers a higher dividend yield. Also, the likely cost of giving up the Dividend King status makes continued payout hikes highly probable for both stocks, though the increases should mean that PepsiCo remains the higher-yielding stock for income investors.

Should you buy stock in Coca-Cola right now?

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Will Healy has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.