Every day, people around the world choose between Coke and Pepsi to quench their thirst for soda.
Similarly, income investors may find themselves deciding between investing their hard-earned savings in Coca-Cola (NYSE: KO) or PepsiCo (NASDAQ: PEP)
Both stocks have historically fetched premium valuations thanks to their industry leadership, diverse product portfolios, and ultrareliable dividends. But Coca-Cola is crushing Pepsi with a 19.4% year-to-date return, compared with a 4.2% decline in Pepsi stock. And over the past five years, Coke is up 53.2%, while Pepsi is down 8.1%.
Coke’s 10-year median price-to-earnings (P/E) ratio is 27.7 — only slightly higher than Pepsi’s 10-year median P/E of 26. But today, Coke’s forward P/E is 25.3 while Pepsi’s has slumped to just 16 — the widest disparity in years. Here’s why investors are bubbling about Coke stock, why Pepsi’s fizz has fallen flat, and which blue chip dividend stock is the better buy now.