Perhaps the most heated brand battle of our generation, Coca-Cola (NYSE:$KO) and Pepsi (NYSE:$PEP) have a rivalry that is unparalleled by any in the industry. But this often is good for investors, as both companies want to gain more popularity and shares. Both beverage giants have averaged around 12% of returns for the last three decades.

But which is the better buy at today’s prices? Let’s look at the stats.

Sustainable competitive advantage

In the food and beverage world, the only real sustainable competitive advantage is provided by brand strength. What we mean by this is that when consumers become familiar and comfortable with a brand, they’re willing to pay slightly more for that company’s products. That slight markup leads to compounding returns over time and diminished influence of potential rivals.

The Coke brand also includes Powerade, Sprite, Vitamin Water, Fanta, and Dasani water. According to Forbes, Coke’s brand is the fifth-most valuable in the world, worth over $55 billion alone.

On the other hand, the Pepsi brand also includes Gatorade, Aquafina, Mountain Dew, and Tropicana — as well as snacks like Quaker Oats, Doritos, and Fritos. The brand value of Pepsi is just over $18 billion.

The winner here = Coca-Cola.

Financial Fortitude

A similar trait in both Pepsi and Coke investors is their reliance on dividends to drive future returns. Since inputs are relatively low-cost and the companies see decent margins based on their brand values, there’s usually a lot of cash flowing in.

While the companies are about the same in terms of the amount of cash coming in, with Coke at $6.4 billion and Pepsi at $6.5 billion, there’s a clear winner when it comes to cash vs debt- Coke. This means that Coke has more options to strengthen its place in the market in the face of an economic downturn than Pepsi.

The winner here = Coca-Cola

Valuation

On virtually every metric, Pepsi is the cheaper choice. While the company’s dividend yield isn’t quite what Coke is offering, its payout is much healthier: Pepsi used 66% of free cash flow over the past 12 months to pay its dividend. Whereas Coke used 97%, rendering a weak sustainability.

The winner = Pepsi

The winner is….

While Pepsi is the obvious cheaper choice, Coke’s brand strength and cash hoard render it the more optimal long-term choice.

Featured Image: twitter