Taking the Soft Drink Taste Test

Coca-Cola (KO), PepsiCo (PEP) and Dr. Pepper Snapple Group (DPS) are clearly the big three in non-alcoholic beverages. DPS began trading in its current form on May 7, 2008 after a spin-off from Cadbury Schweppes.

Coke and Pepsi garner all the accolades in terms of financial strength, stock price stability and earnings predictability. Those great attributes come at a relatively high price. Both stocks now trade for greater than 19x projected 2013 earnings. Their average multiples were 17.4x and 17.1x respectively during the years 2008 – 2012. Those price/earnings ratios look generous when you consider the modest 4-year profit growth.

Dr. Pepper grew significantly faster than KO and PEP since 2008. Despite the better numbers and an attractive yield of 3.18%, DPS is available at a more reasonable 15.6x projected earnings.

Safe and secure KO showed total return of 74.1% since May 7, 2008. PEP provided shareholders with 43.9% including dividends. Less heralded Dr. Pepper out-sparkled both with an effervescent 107.5% dividend inclusive gain.

 All three quoted returns came from a starting point prior to 2008's melt-down. DPS got hit much harder in that downturn but rebounded brilliantly....102 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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