And what about PepsiCo, Inc. (NYSE:PEP)? Simply put, PepsiCo should come out of this unscathed. Not only does Pepsi already make very little money on Diet Pepsi, but PepsiCo, Inc. (NYSE:PEP) actually gets a majority of its business from Frito Lay and Quaker. The truth is that, through acquisition, PepsiCo has become a food company that dabbles in beverages. Over 60% of PepsiCo’s business comes from food products, while only 20% of comes from soda.
Pepsi’s CEO, Indra Nooyi, has been ahead of this curve for years. Ever since she’s taken the helm at Pepsi she’s made healthy eating, sustainability, and social consciousness a priority.
Sometimes Nooyi’s focus on healthy eating have come at the ire of board members, who felt they were a distraction. But today, with the stock near all-time highs, Nooyi’s vision makes more sense for PepsiCo than ever. For Nooyi’s vision and PepsiCo’s product diversification, I feel their stock has the least risk.
Diet Soda Danger! But not in your portfolio!
It may seem like a bit of a reach to make a buy or sell decision strictly on diet soda health risks (or hype), but what else really separates these stocks?
These stocks are stuck in an investment “cola wars” of sorts; they all resemble each other, as investments. All three stocks trade with P/E multiples between 15-20 with dividend yields near 3%. They also are all trading near all-time highs.
So when you look at one business, in Dr Pepper Snapple Group Inc. (NYSE:DPS), that is so reliant on carbonated beverages, I think you have to be somewhat concerned. Especially when you look at competitors like The Coca-Cola Company (NYSE:KO) and PepsiCo, that have less downside risk to the diet soda scare. Both The Coca-Cola Company (NYSE:KO) and PepsiCo offer more diversification, either through food sales (Pepsi) or through healthy beverage alternatives (Coca-Cola).
That doesn’t mean that diet soda will kill you. It also doesn’t mean that you should sell Dr Pepper Snapple Group Inc. (NYSE:DPS). It simply means that you’re probably a bit better off with PepsiCo and Coca-Cola right now, just while you wait to see how this diet soda drama plays out.
The article Diet Soda Danger! How to Keep the Pop in Your Portfolio originally appeared on Fool.com and is written by Adem Tahiri.
Adem Tahiri has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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