Dividends4Life: Coca-Cola's Clock Is Ticking -- Can the Soda Giant Reinvent Itself in Time?

While Coca-Cola (KO - Get Report) and PepsiCo (PEP - Get Report) have many similarities, their futures could ultimately be fairly different from each other. Both companies pay extremely safe dividends, but Coca-Cola's greater concentration in soda (>70% of volume) creates a greater need for it to reinvent itself over coming decades. Coca-Cola is pulling numerous levers to diversify its mix, stabilize near-term business trends, and improve its long-term cash flow generation. Together, these actions seem likely to support the stock for at least several years. However, the company cannot magically restore long-term demand growth for soda (at least in developed markets) and will ultimately need to figure out what it will look like from 2020 and beyond, especially as the iconic Coca-Cola brand moves more from "daily staple" to "occasional specialty treat" (i.e. less consumption).

For now, PepsiCo seems like the more likely long-term winner until Coca-Cola's evolution becomes clearer, so we have included PepsiCo in our Top 20 Dividend Stocks list. However, for investors seeking moderate but safe income with less concern about long-term growth potential, Coca-Cola could be attractive. Coca-Cola trades at about 19 times forward earnings, a premium considering the company's sluggish growth. However, the stock's 3.4% dividend yield is higher than 60% of all other dividend stocks and appears attractive for investors seeking safe, predictable income.

Source: The Street

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