Will The Coca-Cola Company (KO) Lose Investors’ Love?

The Coca-Cola Company (NYSE:KO) trades at 17.7 times its forward price-to-earnings ratio while PepsiCo, Inc. (NYSE:PEP) trades at 18.2 times its forward price-to-earnings ratio. Dr Pepper Snapple Group Inc. (NYSE:DPS) is the cheapest stock based on this metric, trading at 14.42 times its forward price-to-earnings ratio. Given the fact that investors can’t expect explosive growth on the beverage front, the valuations look a little elevated. Analysts are cautiously optimistic about shares’ perspectives. Their mean target prices give Cola-Cola a 13% upside while giving a 3% upside to both Pepsico and Dr Pepper Snapple.

Bottom line

The weather might be good or bad, but the macroeconomic environment is here to stay for at least a while. The Coca-Cola Company (NYSE:KO)must extract more from volume-heavy markets if it wants to continue its growth. PepsiCo, Inc. (NYSE:PEP) has had a good run, and investors should look for an earnings beat in the company’s upcoming report. Dr Pepper Snapple Group Inc. (NYSE:DPS) does not have the emerging market exposure that Pepsico and Coca-Cola have, and this limits its growth potential. It’s no wonder that its shares trade at a discount compared to the other two companies’ stocks.

If interest rates continue to rise, this could put additional pressure on stocks that are considered dividend plays. Institutional investors would like to demand more premium from the risks that arise when investing in stocks. If the companies cannot increase their dividends, there is only one way that this premium yield could become a reality. A drop in stock prices would push the yield.

The article Will Coca-Cola Lose Investors’ Love? originally appeared on Fool.com.

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