Why PepsiCo Is a Better Dividend Stock Than Coca-Cola
Coca-Cola (NYSE: KO) is a global icon with a solid business that has provided investors with strong returns over the long term. It is one of Warren Buffett's favorite investments for a reason. However, for dividend investors, it might make more sense to look at the second big name in the soda space, PepsiCo (NASDAQ: PEP). Here's why.
When it comes to dividend investing, most on Wall Street focus first on dividend yield. That makes sense in many ways, since the yield represents a direct cash return on an investment. From this perspective, the Coca-Cola-versus-PepsiCo comparison is pretty simple. Coca-Cola's nearly-3.1% yield easily beats out the 2.6% on offer from PepsiCo.
PepsiCo's dividend payout ratio has historically been in line with that of Coca-Cola, which suggests that both dividends are on an equally solid footing. And each of these consumer staples stocks has an investment-grade-rated balance sheet. So the financial risks of a dividend cut at either company seem fairly low. So far, some may see these two as interchangeable dividend options, making Coca-Cola's higher yield the tipping point in the decision process.
Source Fool.com
