Coca-Cola Has Raised Its Dividend Through Every Market Crash Since 1962. Here's Whether Income Investors Should Still Own It.

Coca-Cola (NYSE: KO) is one of the most respected dividend stocks on the market. Its flagship product started out as a local sensation in Atlanta and eventually became one of the world's most recognized products. Coca-Cola and the company-owned brands have been so successful that the company has funded 64 consecutive years of payout hikes.

Admittedly, few analysts would call it a sell with that kind of track record. Still, investors may have mixed feelings about holding Coca-Cola, and here's why.

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How Coca-Cola may compare

On the surface, Coca-Cola looks like a great hold or possibly even a buy. Backed by its flagship product and more than 200 other beverage brands, it earned nearly $26 billion in revenue during the second quarter, 9% more than in the year-ago period. Its consolidated net income of $8.4 billion also rose 18% over the same time frame.

Even though its dividend cost was about $4.6 billion in the first half of the year, Coca-Cola appears financially healthy, particularly given that its 2.4% dividend yield is well above the S&P 500 average of 1.1%. Additionally, its 26 P/E ratio mirrors the S&P 500 average, suggesting it sells at a fair price.

If one is to find something wrong with Coca-Cola stock, it is likely to be found when comparing it to rival PepsiCo (NASDAQ: PEP), which equates well in a few respects.

Both companies are beverage-brand empires; PepsiCo is also in the food business through its ownership of Frito-Lay, Quaker, and other brands. One could argue that this makes PepsiCo a less focused business.

One factor is stock price appreciation, where Coca-Cola holds an edge. Coca-Cola stock is up more than 60% over the last five years, with approximately half of that gain made in the last 18 months. PepsiCo is down by around 15% over the same period.

KO data by YCharts

Moreover, PepsiCo's 54-year streak of payout hikes is less than Coca-Cola's, though both are Dividend Kings. These are stocks that have raised their annual dividend payouts for at least 50 consecutive years.

Nonetheless, if buying today, investors will earn a 4.5% dividend yield from PepsiCo, just less than twice the yield earned by new investors in Coca-Cola stock.

Also, while Coca-Cola's stock has outperformed PepsiCo in recent years, this has not always been the case over history, and that factor could start to favor PepsiCo.

PepsiCo has reinvigorated growth in both its beverage and food businesses in recent quarters, and as a result, its valuation appears more attractive. Amid its recent run-up, Coca-Cola's aforementioned 26 P/E ratio is well above PepsiCo's 17 earnings multiple. Such conditions reinforce Coca-Cola's status as a hold or could tempt investors to trade Coca-Cola stock for PepsiCo's.

Moving forward with Coca-Cola stock

Considering the long-term history of both stocks, Coca-Cola is a clear hold but may not be the best choice for putting new money to work.

Indeed, Coca-Cola stock has performed better in recent years. However, with PepsiCo's growth outlook improving, its stock looks like a buying opportunity, particularly at a 17 P/E ratio.

Furthermore, PepsiCo is likely the better dividend stock to buy right now, as its payout exceeds Coca-Cola's by more than two percentage points.

Hence, while Coca-Cola is an excellent stock to own, comparing it to its archrival probably reinforces its hold status.

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.