Coca-Cola Yields 2.3% and Nike Yields 4.4%. Here's Why Only 1 of These High-Yield Dividend Stocks Is a Buy This October.

According to S&P Global's Global Market Intelligence, more than 80% of the companies in the S&P 500 index pay a dividend. Because the opportunity set is large, income-focused investing is a popular strategy among the retail crowd.

It makes sense why. Investing in growth stocks means betting on future earnings that may or may not materialize. Value investing, on the other hand, relies on the market eventually agreeing with your assessment of a particular bargain opportunity. There is uncertainty with these strategies.

Dividends provide a cash inflow to investors in up and down markets. And if you reinvest these distributions, it can boost the total return.

But it's important to understand that not all dividends are created equal. It all depends on the business that's backing them. Two consumer stocks help explain this line of thinking.

Coca-Cola (NYSE: KO) shares pay a dividend yield of 2.3%. Nike (NYSE: NKE) stock pays a dividend yield of 4.4%. Here's why only one of these dividend stocks is a better buy in October.

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Both companies have remarkable dividend streaks

It's a good idea to first establish why these companies are elite at returning capital to shareholders. They both have incredible dividend streaks going right now.

Coca-Cola has raised its dividend for 64 consecutive years. That makes it a Dividend King, a business with at least 50 straight years of dividend increases.

That streak says nothing of the magnitude of the hikes. In the past decade, the beverage stock's dividend has grown by 51%.

Nike has raised its dividend for 24 straight years. That's a shorter streak than Coca-Cola's, but still an impressive one. If history is any indication, the sportswear company will raise the payout later this year.

Nike's dividend growth has been better than Coca-Cola's. The former's payouts have risen by 128% over the last 10 years.

It depends on what you care about most

When choosing which of these two stocks is the better buy in October, investors need to take some critical information into account. It comes down to business quality.

Both Coca-Cola and Nike possess wide economic moats. The soft drink giant has one of the strongest brands on Earth that drives customer loyalty and pricing power. The sportswear leader, which has admittedly struggled in recent years, has also been a globally recognized brand for decades.

If you're primarily chasing the highest yield, Nike is clearly the better option. For a $100 investment, its dividend payout is nearly double that of Coca-Cola.

The trade-off is that Nike's fundamentals have proven significantly more volatile than those of the beverage king. This is reflected in Nike's stock performance, as it trades 79% off its peak from November 2021.

Nike is in the middle of a major turnaround effort as it aims to win back consumers. Sales have been under pressure and are set to decline this fiscal year, according to management. Persistent inflationary pressures in the U.S. don't help. The intensely competitive nature of the industry also makes things extremely difficult, as customers direct their attention and money toward newer footwear purveyors.

If safety is your main concern, go with Coca-Cola. Its dividend streak has survived recessions, inflation spikes, and shifting consumer tastes. That durability comes from the steady nature of the business itself. This is a boring operation that doesn't change much over time. And demand has proven to be stable regardless of economic conditions.

Coca-Cola's sizable profits and free cash flow enable shareholder payouts. It posted a fantastic operating margin of 34.9% in the second quarter (ended July 3), a figure up slightly from the year-ago period. That financial security blanket forces me to lean toward Coca-Cola.

But whichever stock you pick, make sure to weigh the pros and cons.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike and S&P Global. The Motley Fool has a disclosure policy.