Best Stock to Buy Right Now: Coca-Cola vs. PepsiCo

Beverage giants Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) have a lot in common. Some investors might consider them interchangeable investments, but they aren't.

Right now, one is far more attractively valued than the other, which is why you might want to be selective if you are looking to buy one of these stocks right now.

Coca-Cola and PepsiCo make things people buy a lot of

Coca-Cola and PepsiCo are both consumer staples producers. These types of companies generally make products that get consumed on a regular basis, meaning repeat purchases at frequent intervals.

And the costs of consumer staples products are usually fairly low, so consumers usually don't worry too much about cost and, instead, focus more on their personal preferences. Also, most of the products in the segment fall into the necessity arena, so they kind of have to be purchased, no matter the market environment or economic backdrop.

This is why consumer staples stocks like Coca-Cola and PepsiCo are seen as defensive investments. Coca-Cola is a pure-play beverage maker. PepsiCo makes beverages, but it also makes salty snacks (Frito-Lay) and packaged goods (Quaker Oats). In this way, PepsiCo is a much more diversified business.

That said, both Coca-Cola and PepsiCo have a global footprint and powerful distribution, marketing, and R&D tools at their disposal. So while they aren't interchangeable, they are very similar in some important ways.

One of the more important ways that Coca-Cola and PepsiCo are similar is in their reliable performance over the long term. That is best highlighted by each company's status as a Dividend King. This highly elite group of companies has increased their dividends annually for at least 50 consecutive years. That doesn't happen by chance -- it can only happen if a company has a strong business model that gets executed well in both good times and bad.

Data by YCharts.

Where the biggest difference between Coca-Cola and PepsiCo shows up

Interestingly, the dividend is where the biggest difference between these two consumer staples giants starts to show up. The average consumer staples stock has a 2.5% yield, Coca-Cola's dividend yield is 2.8%, and PepsiCo's yield is around 4%. Clearly, PepsiCo is the most attractive income option.

However, there's another little wrinkle here. Coca-Cola's yield is near the lowest point over the past decade. PepsiCo's yield is near the highest point in its entire history. This hints that Coca-Cola stock is actually expensive right now, while PepsiCo stock is on sale.

Data by YCharts.

Traditional valuation measures support that view, with Coca-Cola's price-to-sales, price-to-earnings, and price-to-book value ratios all above their five-year averages and PepsiCo's current P/S, P/E, and P/BV ratios all below their five-year averages. Value-focused and income-focused investors will both likely find PepsiCo more attractive than Coca-Cola right now.

PepsiCo faces some headwinds

Nothing happens in a vacuum on Wall Street. PepsiCo's valuation is attractive right now because it isn't performing as well as Coca-Cola as a business. And PepsiCo's diversification is part of the problem, since its large and important snacking business is dealing with demand headwinds.

In fact, the company reduced its full-year 2025 projections when it reported first-quarter earnings. If history is any guide, however, management will figure out a way to get back on track. Notably, it has been working on the acquisition front to bring in new brands via bolt-on deals that are more in line with consumer tastes today.

There's nothing inherently wrong with Coca-Cola as an investment. And, to be fair, traditional valuation metrics hint at a fair to slightly high price, not an extremely high valuation. It wouldn't exactly be a big mistake to buy the beverage giant. But PepsiCo will likely still be the more attractive of the two for most income investors and those with a value bias of any kind.

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Reuben Gregg Brewer has positions in PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.