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Is This Beverage Company a Better Investment than The Coca-Cola Company (KO)?

According to Glassdoor.com, Dr Pepper Snapple Group Inc. (NYSE:DPS) employees have rated their employer a 2.7 of 5, which is below average. Only 43% of employees would recommend the company to a friend, and a paltry 44% of employees approve of CEO Larry D. Young. This is mostly attributed to a poor work/life balance.

Comparatively, The Coca-Cola Company (NYSE:KO) employees have rated their employer a 3.5 of 5, 69% of employees would recommend the company to a friend, and an impressive 86% of employees approve of CEO Muhtar Kent.

For Pepsi, employees have rated their employer a 3.3 of 5, 64% of employees would recommend the company to a friend, and 71% of employees approve of CEO Indra K. Nooyi.

Another important note is that if talented potential employees become aware of these comparisons, they will opt for The Coca-Cola Company (NYSE:KO) or Pepsi instead of Dr Pepper.

Cutting costs

Dr Pepper launched its Rapid Continuous Improvement program in 2011. This had led to impressive cost savings and efficiency. For example, Dr Pepper closed 10 warehouses, and it cut its delivery fleet by more than 1 million miles. According to the shareholder letter, Dr Snapple closed its distribution gaps and increased its all-commodity volume, which will in turn put more products in more stores and increase shelf space.

Despite cost-cutting initiatives, Dr Pepper hasn’t strayed from returning its excess cash flow to shareholders. Buybacks are constant, and the company’s dividend has increased five times since its IPO. Dr Pepper currently yields 3.30%, which is higher than The Coca-Cola Company (NYSE:KO) and Pepsi — both of which yield 2.80%.

Conclusion

Dr Pepper seems to be making the right moves, and the company’s stock has performed well since its inception. Revenue and profits have consistently improved annually, but top-line growth has slowed. Increased product diversification gives Dr Pepper the potential to refuel its growth, but aside from strength in Latin America, the company doesn’t have as much exposure to emerging markets where many consumers aren’t as health-conscious as The Coca-Cola Company (NYSE:KO) and Pepsi. Overall, Dr Pepper should make a decent investment going forward, but it’s simply not as strong as Coca-Cola or Pepsi.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo (NYSE:PEP). The Motley Fool owns shares of PepsiCo. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is This Beverage Company a Better Investment than Coke? originally appeared on Fool.com is written by Dan Moskowitz.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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