The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS): Is Soda Bad for Your Portfolio?

Dr Pepper Snapple Group Inc. (NYSE:DPS) has increased their dividend five times since 2009 boosting it by 12% in 2012. You’ll also notice from the chart that Dr. Pepper’s dividend has grown by153%. The yield now stands at 3.40% at the lowest payout ratio of these three companies at 46%. The company has been buying back shares, $2 billion worth since 2010 with another $400 million scheduled this year.

The Coca-Cola Company (NYSE:KO) holds the number one rank in the Interbrands annual 100 Best Global Brands for 2012. It offers a 2.90% yield at the highest payout ratio of these three at 57%. But don’t worry about that; Coca-Cola is a Dividend Aristocrat and has raised the yield for 50 years straight.

The forward earnings multiple is 17.08. Its operating margin is the highest of these at 23.44 % but five year EPS growth is expected to be only slightly higher than Dr Pepper at 7.90%.

PepsiCo, Inc. (NYSE:PEP) is the best performer, up 8% over the last year even as The Coca-Cola Company (NYSE:KO) and Dr Pepper Snapple Group Inc. (NYSE:DPS) were down over 1%. PepsiCo may have the the lowest yield at 2.80% but the payout ratio is 51%.

Its forward earnings multiple is 17.10 and analysts give it the highest five year EPS growth prediction at 8.30%. Analysts may be right as PepsiCo has also been taking its food brands to a new level of healthfulness even offering a Quaker quinoa bar.

Extra credit for global expansion
Growing overseas is part of the answer to offset US soda declines. Coca-Cola global volume rose 1% in the second quarter but saw a hiccup in the usually stronger Asia and Latin America volumes. However, it has 3,500 global products in 200 countries.

Net sales overall were flat for Dr Pepper in the second quarter but noted Mexican and Caribbean volumes rose 2%. Dr. Pepper plans to expand beyond the North American market and they recently purchased Australian and Asian distribution rights for Snapple.

Meanwhile PepsiCo, Inc. (NYSE:PEP) reported gross margin expansion of 110 basis points and 17% growth in EPS to $1.31 for the second quarter. Organic revenue grew 14% in Asia, Middle East, and Africa and 12% for Latin America Foods.

Put your pencils down!
My final answer on the state of soda stocks’ health is buy Dr Pepper for high yield and most upside with its global plans and promotions. Coca-Cola doesn’t have a food buffer like PepsiCo and so may just tread water. Globally, PepsiCo is the strongest as well as building out a strong portfolio of healthful brands but Dr. Pepper has more room to grow.

The article Is Soda Bad for Your Portfolio? originally appeared on Fool.com and is written by AnnaLisa Kraft.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo.

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