Consumer staples makers are under pressure, which has left some of the industry’s most iconic names with attractive prices.
Coca-Cola is performing well despite the industry’s headwinds and appears reasonably priced.
PepsiCo isn’t hitting on all cylinders today, but the price appears highly attractive.
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Two significant trends are emerging in the consumer staples sector. First, consumers are concerned about rising costs, and many are reining in their spending. Second, consumers are increasingly opting for healthier food options. Both are potentially bad news for food-focused consumer staples companies, and investors have reacted by shifting away from food companies.
If you are a contrarian, this is an opportunity. As is often the case on Wall Street, the baby is getting tossed out with the bathwater. So, even historically well-run companies like Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) appear to be on sale. Here’s why these could be no-brainer stocks to buy right now.
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Coca-Cola is the world’s most prominent non-alcoholic beverage company. Its portfolio of brands is industry-leading, and many of its products have a highly loyal customer base. Its marketing and distribution prowess is on par with any of its peers. And the company is large enough to use acquisitions to quickly update its brand and product offerings if it falls out of step with consumer tastes.
PepsiCo competes with Coca-Cola in the beverage market, but it is more accurately viewed as a diversified food maker. In addition to being a large player in the beverage space, PepsiCo is also the world’s largest salty snack company (Frito-Lay) and a major force in the packaged food space (Quaker Oats). It stands toe-to-toe with Coca-Cola in terms of its business capabilities.
In fact, both Coca-Cola and PepsiCo rank among the world’s 10 largest consumer staples companies. Coca-Cola is ranked fourth on the list, and PepsiCo is ranked seventh. They also share another elite membership, as both companies are Dividend Kings. It requires a strong business plan that gets executed well in both good times and bad to increase a dividend annually for 50-plus years.
At their core, both Coca-Cola and PepsiCo are very good companies. However, investors are downbeat on the consumer staples sector, as noted above. Both stocks should appear attractive to investors who think in decades, rather than days.
Coca-Cola is likely to be more appealing to conservative investors. That’s largely because the business is performing fairly well, despite the difficult operating environment. To put some numbers on that, the company’s organic sales rose 6% in the third quarter of 2025. That was up from 5% in the second quarter and far above the third quarter tally of PepsiCo, which was just 1.3%.
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The relatively strong performance, however, means that Coca-Cola’s valuation is somewhat less attractive than that of PepsiCo at present. Still, Coca-Cola appears reasonably priced, if not a little cheap. Its price-to-sales ratio is roughly on par with its five-year average, and the 2.9% dividend yield is middle of the road, historically speaking. However, Coca-Cola’s price-to-earnings and price-to-book-value ratios are both below their five-year averages.
Taken as a whole, these valuation tools hint at a reasonable entry point for more conservative investors.
As noted, PepsiCo is lagging behind Coca-Cola in terms of business performance. However, it gets worse. The company’s 1.3% organic sales growth in the third quarter was down from 2.1% in the second quarter of 2025. Thus, it looks like things are getting worse for PepsiCo, not better, right now. Given the company’s long and successful history, however, it seems likely that it will eventually figure out a way to get back on track.
Still, investors are worried, and the stock price has been very weak. The roughly 4% dividend yield is near the highest levels in the company’s history. Its P/S and P/B ratios are both below their five-year averages. The P/E ratio is above the five-year average, but earnings are highly variable from year to year and weak right now, so that’s not shocking. Taken together, these metrics suggest PepsiCo is on the sale rack.
You’ll need a strong stomach to buy PepsiCo right now, but if history is any guide, this is a temporary situation. Notably, it has been buying new brands to better align its product portfolio with consumer trends. There’s also an activist investor pushing the company to follow Coca-Cola’s lead and outsource the bottling of its beverages, which could improve profit margins. There are numerous moving parts, but a positive outcome for long-term investors seems likely.
Contrarian investors should take note when an entire sector is put into the Wall Street doghouse. It is a time for a deep dive, and it can be an opportunity to buy some of the industry’s best players at attractive prices. That’s what appears to be on offer with Coca-Cola and PepsiCo today. Coca-Cola’s relatively strong business performance makes it the better pick for more conservative investors, while PepsiCo will likely appeal to those willing to take greater risks for greater rewards. Or, just maybe, the right risk-reward balance for you is to buy a little of each.
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Reuben Gregg Brewer has positions in PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
2 No-Brainer Dividend Stocks to Buy Right Now was originally published by The Motley Fool
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