Coca-Cola and Procter & Gamble Are Up This Month. Which Dow Dividend Stock Is the Better Buy Now?

Two of the most boring stocks on the Dow just had their best months in years. Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG) are both up by double-digit percentages over the past month or two, with the beverage giant hitting a fresh all-time high and the household goods powerhouse logging its best single trading day since the pandemic crash. Given that these two stocks usually move far more gently, it would be wise to take a careful look at what drove those runs before deciding whether to chase them.

Image source: Getty Images.

Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Why is money flooding into soda and soap?

My short answer to the question of what powered these stocks' surges is fear, not a sudden appreciation for dividends. Tech and AI-related stocks sold off hard in mid-October on worries about AI capital spending, and that money had to go somewhere. Consumer staples companies -- the boring, recession-resistant businesses that sell things people keep buying whether the economy is good or bad -- became the landing pad. The sector's valuation has climbed by enough that strategists now describe what's happening as a defensive rotation rather than a sign of stronger demand.

Beyond that broader shift in market sentiment, both companies gave investors real reasons to show up: On Oct. 22, P&G delivered fiscal first-quarter results that beat estimates, with organic sales growth accelerating to 4%, driven for once by actual volume growth rather than just price increases. The stock jumped roughly 6% that day, its biggest single-day move since early 2020.

On Tuesday, Coca-Cola delivered a Q3 report that helped justify its prior run-up -- it beat estimates on both the top and bottom lines (revenue rose 7% to $13.4 billion, non-GAAP EPS rose 11% to $0.91). In addition, management raised its 2026 guidance a second time, to at least 5% organic revenue growth and at least 11% non-GAAP earnings growth, up from the 9%-to-10% range it had guided for three months prior.

What these companies are doing shows they are still active. This month alone, P&G closed its $3.9 billion acquisition of supplement brand Thorne, expanding its footprint in the premium wellness niche. Coca-Cola, for its part, just announced that in 2027, it will pick up KFC's U.S. beverage business, ending PepsiCo's roughly 40-year run as the fried chicken chain's supplier.

Why I wouldn't make a long-term call off a one-month chart

Here's my take: Neither of these stocks' recent upsurges tells you much about whether they will be good investments for the next five years. Investors' recent rotation out of AI stocks and into consumer staples came in reaction to short-term fears, so it shouldn't be viewed as a verdict on the long-term business outlook for Coca-Cola or Procter & Gamble. If the market's worries over AI capex fade next month, some of this money could rotate right back into tech, and these stocks could easily give back some of their gains.

Jumping into a stock because it just had a good month is the same mistake as avoiding a stock because it just had a bad one -- you're reacting to a few weeks of price action instead of judging the actual business and what you're paying for it. The things that matter here are whether the businesses' underlying growth drivers (P&G's returning volume, Coke's raised guidance) are real and durable. Those points will take a lot longer than a month or two to prove out.

So which is the better buy right now?

The forward earnings ratio is the metric I'd focus on to make a decision between these two stocks, and that comparison favors P&G. Even after its post-earnings pop, Procter & Gamble trades around 23 to 24 times forward earnings, close to its own five-year average. Coca-Cola, fresh off a 32%-plus run-up so far this year that saw it set a new all-time high, trades at closer to 26 to 28 times forward earnings. Notably, its Q3 beat this week barely moved the stock, a sign that the market had already priced in expectations for a strong quarter.

I like both businesses, and Coca-Cola's growth guidance is genuinely impressive, assuming that it will hold up. But I'd rather buy the one that has merely caught up to a fair price than the one that's already pricing in more growth. For my money, right now, that's P&G.

Micah Zimmerman 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.