Up 35%, How Long Can Coca-Cola Continue Crushing the S&P 500?
Key Points
Coca-Cola's rising stock price has given it a higher valuation and lower dividend yield than its archrival.
PepsiCo's improving growth may cause some industry investors to choose its stock over Coca-Cola's.
Coca-Cola (NYSE: KO) has delivered for investors this year. The stock has scored total returns of 35% since the beginning of the year. That is well above the 14% total return of the S&P 500 (SNPINDEX: ^GSPC), an unusual performance for a mature company accustomed to single-digit revenue growth.
As a result, Coca-Cola stock is having its best year since 1996. Still, even though its performance could continue, the stock's growth could face a roadblock in its archrival, PepsiCo. Here's how.
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PepsiCo's total return for 2026 is around -3%, far below Coca-Cola's. Still, despite that performance, PepsiCo's stock is becoming the better buy on just about every level.
KO Total Return Level data by YCharts
Admittedly, PepsiCo reported negligible revenue growth for years as consumer tastes shifted away from its products. However, improvements began in fiscal 2025 as it cut prices on some items and added healthier ingredients to its products.
That shift should highlight PepsiCo's increasingly attractive financials, and its revenue growth was 6% in its latest quarter, close to Coca-Cola's 7%.
That is likely not enough of a difference to justify Coca-Cola's considerable valuation premium. Currently, it trades at 29 times earnings, far above PepsiCo's P/E ratio of 17. Moreover, PepsiCo's dividend yield of 4.2% is meaningfully higher than Coca-Cola's 2.2%. Even though Coca-Cola's 64-year dividend increase streak is longer than PepsiCo's at 54 years, both hold Dividend King status, meaning companies that have increased their payouts for 50 years or more.
This is not to say that Coca-Cola is a sell. Coca-Cola owns over 200 beverage brands that remain popular globally, and analysts forecast 4% revenue growth during 2026. That is likely enough to keep the more conservative, income-oriented shareholders in Coca-Cola stock.
Nonetheless, PepsiCo's improvements make its lower P/E ratio and higher dividend yield more attractive. That factor alone suggests that Coca-Cola could struggle to attract additional buyer interest.
Will Healy has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.