1.

Earnings:

PEP may own a more diverse product line, but KO has been able to drive more
earnings to its bottom line. While KO’s net income has been trending downward in
recent years, it manages to stay ahead thanks to superior margins. PEP has
produced consistent net profit margins of around 10%, while KO margins have
been in the 15-18% range for the past several years.

2. Sales
KO may be able to produce more net income, but PEP has been generating more top-line
revenue than KO for decades. KO is primarily a beverage business, but PEP generates
around half of its sales from food brands such as Doritos, Frito Lay and Quaker Foods.
Soda sales declined for the 12th consecutive year as investors have been turning to
bottled water and other healthier beverages, a trend that could affect KO more than PEP

3. Consecutive Dividend Increases

Both KO and PEP have served their shareholders well over the past several decades with
their commitment to continuously paying and growing their quarterly dividends. Both KO
and PEP are dividend aristocrats, which are companies that have raised their dividend for
at least 25 consecutive years. As a result, these companies are highly sought after by
dividend investors for their predictable and sustainable income streams.
Find other companies that have increased their dividends for more than 25 consecutive
years, in our 25-year dividend increasing stocks page.

4. Dividend Growth
Perhaps just as impressive as their streak of consecutive dividend increases is the rate at
which KO and PEP have grown their dividends. KO has averaged an 8.5% annual
increase over the past decade, while PEP has posted an average raise of nearly 10% over
the same time frame.
Check out Why Pepsi is a Core Dividend Stock.

5. Dividend Payout & Yield

Due to the cash-intensive nature of their businesses, PEP and KO have been able to offer
shareholders a dividend yield well above that of the S&P 500 for most of the past decade.
KO is currently one of the ten highest-yielding Dow stocks, and both companies have
doubled their annual dividend per share since 2007.
Check out the dividend history of Coca-Cola here and Pepsi here.
6. Social Media Following
Social media is an ideal channel for marketing a business, since users essentially opt in to
receive low cost advertising. Effective strategies generate strong word of mouth and can
reach millions of individuals in minutes. KO recently passed 100 million likes on Facebook,
while Pepsi also maintains a strong presence. Both companies have smaller, yet
important, followings on other platforms such as Twitter and Instagram.
7. Advertising Spending
Companies can spend billions of dollars each year promoting their products to existing and
potential customers. In 2016, KO eclipsed the $4 billion mark in worldwide ad spending
with PEP spending around $2.5 billion. Both companies regularly produce commercials for
the Super Bowl, while PEP is in the midst of a 10-year contract to sponsor the halftime
show.
8. Price Performance
The continued weakness in soda sales has especially impacted KO’s stock. Over the past
five years, KO has significantly trailed the performance of both PEP and the S&P 500.
PEP’s more diversified lineup of food products has helped soften the blow of declining
soda sales. However, on an overall basis, both companies have been experiencing
negative sales growth. Due to these factors, KO and PEP have both been
underperformers compared to the broader market