While life’s great debate has always been The Coca-Cola Company (NYSE:KO) or PepsiCo, Inc. (NYSE:PEP), Dr Pepper is trying to make a name for itself in the competitive nonalcoholic beverage business. Despite issues surrounding health problems with sugary drinks, these companies have been making strides in developing healthier product offerings. They also have portfolios of globally recognized brands and offer strong dividend yields in excess of 2.5%.
The Coca-Cola Company (NYSE:KO), the world’s largest beverage maker, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company’s primary brands are Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glaceau, and Vitaminwater.
The Coca-Cola Company (NYSE:KO) enjoyed a successful 2012 as sales rose by 3.17% over the prior year and operating income increased by 6.1%. The company continued to make acquisitions on 2012, introduced over 500 new products (100 of which are zero calorie or sugar free), and added two new billion-dollar brands, bringing its total to 16.
The Coca-Cola Company (NYSE:KO) currently trades at a P/E of 22.56, above its five-year average of 17.48. The company pays a dividend of 2.61% and has a five-year average dividend growth rate of 8.06%
The Broader Portfolio
PepsiCo, Inc. (NYSE:PEP) operates as a food and beverage company worldwide. The company’s food division offers Lays, Ruffles, Doritos, Tostitos, Cheetos, branded dips, Fritos, Quaker Oatmeal, Aunt Jemima, Chewy granola bars, Capn Crunch, Life, and Rice-a-Roni. The beverage group offers Pepsi, Mountain Dew, Gatorade, Diet Pepsi, Aquafina, 7UP, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist, and Mirinda brands; and ready-to-drink tea and coffee products.
PepsiCo, Inc. (NYSE:PEP) did not have a successful 2012 as revenues dropped by 1.5% versus the prior year and operating income decreased by 4.1%. PepsiCo, Inc. (NYSE:PEP) does stand to benefit from its wider product offerings, and has a large brand portfolio of healthy items including fruit juice, hummus, oatmeal and Gatorade. The company also saw strong results in the first quarter of 2013 with organic revenue growth of 4.4%.
The company has rebounded well from a weak 2012 and currently trades within $1 of its 52-week high. The P/E ratio stands at 21.49 versus a five-year average of 17.16. The dividend yield is 2.71% with a five-year average dividend growth rate of 8.64%
The Little Guy
Dr Pepper Snapple Group Inc. (NYSE:DPS) operates as a brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean. The company’s beverage portfolio includes Dr Pepper Snapple Group (NYSE:DPS), Crush, Canada Dry, Sunkist soda, Schweppes, 7UP, A&W, RC Cola, Squirt, Peñafiel, Sun Drop, Diet Rite, Welch’s, Country Time, Vernors, Hawaiian Punch, Snapple, Hawiian Punch, Motts, Clamato, Yoo-Hoo, Deja Blue, FIJI, AriZona, ReaLemon, Nantucket Nectars, Mr and Mrs T mixers, Mistic, and Roses.
Net sales increased by 2% in 2012, while operating income increased by an equivalent 2%. The company has also embraced the challenges of consumer concerns around health and wellness by launching additional brands in the TEN platform. These beverages offer great taste with just ten calories per serving. The company currently offers six flavors in the TEN platform. First quarter 2013 results were solid as net sales increased by 1% and core EPS grew by 15%.
Dr Pepper Snapple Group (NYSE:DPS) also trades near its 52-week high and has a P/E of 16.47 versus a five-year average of 15.81. The company pays a dividend of 3.09%, and increase of 11.76% over the prior year.
Foolish Conclusion
All three of these companies have made efforts to increase their healthy offerings, and all three could make good investments for your portfolio. The Coca-Cola Company (NYSE:KO), a Warren Buffett favorite (Berkshire owns 9% of the stock) is a powerhouse brand and will continue to grow sales while paying a strong divided. PepsiCo, Inc. (NYSE:PEP) pays a nice dividend and has the potential to grow its business through strategic marketing efforts between its food and beverage businesses. The company also has the biggest portfolio of healthy offerings. Dr Pepper Snapple Group (NYSE:DPS) is the little brother, but also appears like a good investment given its 3%+ dividend yield and low valuation versus The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP). While they have the most work to do as a company, success in their TEN platform could prove beneficial for shareholders. Most importantly, all three stocks have a demonstrated commitment to growing their dividend.
The article Can Non-Alcaholic Beverages be Fun? originally appeared on Fool.com.
John Timmes has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. John 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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