Better Earnings, But a Similar Theme 

Pepsi delivered a double beat with adjusted EPS coming in at $1.61, which beat estimates for $1.55. On the top line, the company delivered revenue of $19.44 billion, beating estimates for $18.89 billion. Analysts have been quick to raise their price targets, with BNP Paribas having the highest target, moving to $195 from $191. However, the consensus price target for PEP stock is still around $170, which is only about a 7.5% increase from its closing price on April 17.  

This is where it’s important to note what many investors already know. Pepsi and Coca-Cola are frequently linked together, but the companies are different. Many investors prefer Pepsi for its diversified business model that includes a snacks business in addition to its signature beverage brand. 

However, that diversification has come with some margin complexity as the company deals with supply chain concerns, and consumers deal with inflation. The bottom line is that the company’s earnings reports were solid and encouraging. But much of that good news may be priced in, leaving limited room for upside. 

Coca-Cola Earnings Are on Deck – Where the Opportunity May Lie 

Coca-Cola is scheduled to report Q1 2026 earnings before the market opens on April 28. Analysts are projecting adjusted EPS of 81 cents, which would be an 11% year-over-year increase. Right now, analysts have a consensus Buy rating on KO with a consensus price target of $85, which is almost 12% higher than the closing price on April 17.  

But here’s where the opportunity may lie. Analysts have been raising their price targets before earnings. That includes Jefferies and UBS Group, which have price targets of $90, which is over 5% above the consensus target.  

That suggests that KO may not have had its catalyst moment yet, and that’s why this may be a time for investors to take a position in the stock.  

The One Metric That May Set KO Apart 

It bears repeating: Pepsi and Coca-Cola are both solid companies. However, when comparing operating margin, there’s a clear bullish case for KO. In this case, Coca-Cola delivered full-year 2025 operating margin of 31.3%. Additionally, operating income rose 5.1% to $15 billion on $47.9 billion in revenue.  

By contrast, PepsiCo’s full-year operating income dropped 19.57%, weighed down by $1.9 billion in intangible asset impairments, including the Rockstar energy brand. But why? This comes down to the company’s business models. Coca-Cola’s asset-light, concentrate-and-brand model allows wider margins to absorb input cost shocks, tariffs and FX headwinds when compared to Pepsi’s vertically integrated food-and-beverage operation. 

The Dividend: Why Higher Yield Doesn’t Always Mean Better 

For income investors, the comparison between KO and PEP gets interesting — and a little counterintuitive. On the surface, PepsiCo looks like the more attractive dividend stock. Its yield of roughly 3.9% is meaningfully higher than Coca-Cola’s approximately 2.9%. And with 53 consecutive years of dividend increases, PEP has earned its Dividend King status. 

But yield alone doesn’t tell the whole story. What matters just as much is whether a company can sustain and grow that dividend over time, and that’s where the numbers start to diverge. 

Coca-Cola carries a payout ratio of approximately 67%, supported by free cash flow coverage of around 71%. That’s a conservative, well-cushioned profile. PepsiCo, by comparison, pays out roughly 93% of net income in dividends, with free cash flow coverage closer to 63%. When a company is paying out nearly all of its earnings as dividends, there’s very little buffer if business conditions deteriorate. 

The concern becomes more concrete when you look at the raw numbers. In fiscal year 2025, PepsiCo generated free cash flow that was nearly identical to the total dividends it paid out — a coverage ratio of essentially 1.0x. There is no margin for error there. One difficult quarter, one unexpected charge, and the math gets uncomfortable. 

Coca-Cola, meanwhile, has guided for approximately $12.2 billion in free cash flow for 2026, which puts its dividend on considerably firmer footing going forward. The company has raised its dividend for 64 consecutive years, and the trajectory of its balance sheet suggests that streak is not under pressure.

The bottom line for income investors: PepsiCo’s higher yield is real, but it comes with a tighter rope. Coca-Cola’s lower yield is backed by a more sustainable model — and for long-term dividend investors, sustainability tends to matter more than yield at the point of purchase.

The Short-Term Case for KO

Pulling this together, the argument for Coca-Cola as the better near-term trade rests on a few converging factors. Earnings are still ahead, analyst sentiment is strong and trending higher, the operating margin profile is superior, and the dividend is on a more secure foundation. 

PepsiCo had its moment on April 16. The beat was real, the targets moved up, and the stock responded. That’s a good outcome, but it also means the easy money may have already been made for short-term traders. Coca-Cola investors are still waiting for that catalyst. 

With KO reporting April 28, a company that has topped Wall Street estimates in each of the last four quarters, the setup looks favorable. The FIFA World Cup partnership and the ongoing Fairlife expansion signal that management is investing in growth, not simply defending legacy brands. And with analysts like UBS and Jefferies carrying $90 price targets well above the current consensus, there is room for the stock to reprice higher if earnings deliver. 

Both Are Refreshing, But One May Be More Timely 

Neither of these stocks is a bad investment. PepsiCo remains a global powerhouse with a 53-year dividend streak and a diversified business that has real long-term appeal. Investors who own PEP have no compelling reason to sell based on fundamentals. 

But for investors evaluating where to put new money to work right now, Coca-Cola presents a timelier opportunity. The stock has more analyst-implied upside, a cleaner margin story, a more sustainable dividend, and an earnings catalyst that hasn’t happened yet. Sometimes the better trade isn’t about finding a broken company to fix; it’s about finding a strong company before its next good news. Right now, that company may be Coca-Cola.

But look at this chart, and you’ll understand why a bigger move may be underway.  

Why Consumer Staples Stocks Are Back in Play 

Money has rotated back into defensive earnings compounders as investors reassessed stretched valuations in AI, semis, and high‑beta growth. Macro data have stayed “good but not great,” keeping recession odds on the table while also reducing the probability of aggressive rate cuts, which supports a bid for steady free‑cash‑flow names that can grind higher even in a slower nominal growth world. 

That backdrop favors consumer staples with three characteristics: visible pricing power, globally diversified demand, and an ability to translate incremental revenue into outsized EPS and dividend growth. Beverage majors like PepsiCo (NASDAQ: PEP) and Coca‑Cola (NYSE: KO) screen well across all three dimensions, which is why they have led recent consumer staples sector performance rather than food manufacturers or household‑product names that still face heavier mix and cost headwinds. 

From a portfolio‑construction standpoint, investors are less interested in the old “bond proxy” narrative and more focused on staples as a source of upside convexity if growth disappoints and the market broadens out beyond the megacap tech complex. That creates an opening for high‑quality staples to re‑rate back toward their historical premiums as earnings revision momentum stabilizes.

PepsiCo: Quietly Re‑Accelerating

PepsiCo comes into this consumer staples rebound with an underappreciated earnings inflection story. Management has already pivoted from pure price‑led growth toward a more balanced algorithm of modest volumes plus disciplined pricing, which better matches a consumer that remains value‑conscious but hasn’t rolled over. That balance is important because it signals that the company is not just “harvesting” the pandemic‑era pricing reset but still investing behind brands and distribution to defend share.

The core North America snacks and beverages franchises give PepsiCo a structurally advantaged platform: it can flex pack sizes, channel mix (especially convenience and food‑service), and promotional intensity to protect volumes without fully reversing prior price increases. International remains a second engine, with emerging markets still driving unit growth as middle‑class consumers trade up into global brands.

On the P&L side, PepsiCo has visible levers for margin resilience—procurement, mix shift toward higher‑margin categories, and ongoing productivity programs. That has allowed EPS to grow faster than revenue and should continue to support mid‑single‑digit to high‑single‑digit EPS growth even if top‑line decelerates. For income‑oriented investors, the combination of a competitive dividend yield, a long history of annual increases, and steady buybacks makes the total‑return profile attractive once the valuation risk premium compresses.

Coca‑Cola: Pricing Power on Display

Coca‑Cola’s latest quarter underscores why global beverage systems tend to outperform later in the cycle. Net revenues grew roughly low‑single‑digits year over year in Q4 2025, with organic revenue up about 5% as a 4% increase in concentrate sales and a positive price/mix contribution offset only modest unit volume gains. While reported revenue came in below consensus, EPS grew faster than sales thanks to expanded comparable operating margins and disciplined cost control.

Reported earnings per share for the quarter increased to about 0.53 dollars, with comparable EPS of roughly 0.58 dollars exceeding analyst expectations by a couple of cents. For the full year 2025, net revenues rose around 2% to just under 48 billion dollars, but net income grew more than 20%, reflecting meaningful operating leverage and the benefit of prior years’ restructuring. That spread between revenue and profit growth is precisely what investors want to see from a mature staples bellwether.

Importantly, the quarter also demonstrated Coca‑Cola’s ability to absorb noise. A large non‑cash impairment tied to a secondary brand weighed on reported operating margin, but comparable operating margin still ticked higher year over year into the mid‑20s, supported by productivity and mix. Management’s 2026 outlook calls for low‑single‑digit net revenue growth and mid‑single‑digit comparable EPS growth, which looks conservative enough to be beatable if volumes hold and FX headwinds ease. In a market that has punished “just okay” numbers from cyclicals, that level of visibility has renewed investor interest in KO as a core defensive compounder.

What Makes This Consumer Staples Move Different

That setup supports a thesis where investors can own these names for a baseline of mid‑single‑digit top‑line growth, a couple of points of margin expansion over time, and high‑single‑digit EPS growth, with dividends layered on top. If risk sentiment deteriorates and the market rotates further toward quality and stability, that earnings profile could command a higher multiple, providing an additional source of upside.

That setup supports a thesis where investors can own these names for a baseline of mid‑single‑digit top‑line growth, a couple of points of margin expansion over time, and high‑single‑digit EPS growth, with dividends layered on top. If risk sentiment deteriorates and the market rotates further toward quality and stability, that earnings profile could command a higher multiple, providing an additional source of upside.

The current rotation into staples is not just a reach for yield; it is a search for resilience that doesn’t require a full‑blown recession to work. In prior cycles, staples outperformance often came alongside significant multiple expansion as investors treated the group almost like a duration trade against falling rates. This time, the setup is more nuanced: rates remain elevated in real terms, but inflation has cooled, and the market is rewarding companies that can sustain real pricing power without destroying volumes.

PepsiCo and Coca‑Cola benefit from structural advantages that are hard to replicate: vast distribution networks, entrenched brands, and decades of category management data. Their categories are also relatively insulated from private‑label encroachment compared with center‑store grocery, which means the consumer “trade down” dynamic is less threatening than for many food peers. Meanwhile, both companies have leaned into smaller, higher‑margin formats and better‑for‑you adjacencies, allowing them to participate in health‑conscious trends rather than be disrupted by them.

That setup supports a thesis where investors can own these names for a baseline of mid‑single‑digit top‑line growth, a couple of points of margin expansion over time, and high‑single‑digit EPS growth, with dividends layered on top. If risk sentiment deteriorates and the market rotates further toward quality and stability, that earnings profile could command a higher multiple, providing an additional source of upside.

Risks to the Consumer Staples Comeback

The biggest risk to the consumer staples comeback is that the soft‑landing narrative proves too pessimistic and the economy actually re‑accelerates, pulling capital back into cyclicals and high‑growth tech at the expense of defensives. A renewed “risk‑on” chase could compress multiples for staples even if fundamentals remain intact, creating a period where investors get paid primarily through dividends and EPS growth rather than price appreciation.

Input‑cost volatility is another swing factor. While commodity pressures have eased from the peaks of 2022–2023, packaging, sweeteners, and logistics remain structurally higher than pre‑pandemic, limiting how much incremental margin expansion management teams can deliver without additional pricing. Regulatory and political risk—including sugar taxes, packaging mandates, and restrictions on marketing to younger consumers—also represent medium‑term overhangs for global beverage companies.

Finally, both PepsiCo and Coca‑Cola now face a higher bar for execution simply because expectations have reset upward following their latest prints. Coca‑Cola, in particular, is guiding to a more moderate growth cadence after a strong profit recovery in 2025, which leaves less room for operational missteps or macro downside before investors revisit the multiple they are willing to pay. For long‑term investors, however, these risks look manageable relative to the quality of the underlying franchises.

Conclusion

For an investor audience, the key takeaway is that the “boring” part of the market is starting to look interesting again. Consumer staples, led by beverage majors like PepsiCo and Coca‑Cola, offer a blend of durable demand, demonstrated pricing power, and improving capital‑return profiles that fit well in portfolios seeking ballast against an increasingly narrow, growth‑heavy tape.

The recent earnings trajectory at Coca‑Cola—modest revenue growth, stronger EPS gains, and conservative guidance—illustrates the kind of steady, all‑weather performance that can compound quietly in the background while the market debates the next macro scare.

Spoiler alert…the data is likely to be more of the same. Both the CPI and PPI readings are expected to come in between 2.6 and 3.0. That signals that the rate of inflation isn’t accelerating, but it’s not moving lower either.  

This matters to investors for two reasons. First, higher prices reduce the purchasing power of your dollars. So far, there hasn’t been a broad decline in consumer spending, but that depends on your income level. In 2026, investors are also having to weigh a job market that is showing cracks. That impact may not be reflected in consumer spending.  

Second, managing inflation is one part of the Federal Reserve’s dual mandate. Having a rate well above the Fed’s preferred 2% target is likely to be the reason it will keep interest rates steady at its next meeting in late January.  

However, investors can turn any change in economic data into opportunities. In this case, investors should look for companies that will likely be unfazed by price pressures.  

What You Need to Know About This Round of Inflation Data 

The CPI and the PPI both measure inflation. However, the CPI is a lagging indicator as it reports where prices have been. The PPI, by contrast, is a leading indicator. This goes back to basic economics.  

Companies experience price increases before the consumer does. In 2025, producer prices moved higher primarily due to rising commodity prices and tariffs.

But this time around, both the CPI and the PPI will be lagging indicators. You can thank the government shutdown for that. The information in this week’s PPI will be from November 2025. That means the data is likely to have already been reflected in the CPI.  

It’s an anomaly. But it’s something to be aware of. In this age of high-speed algorithmic trading, these reports can increase volatility.  

PepsiCo: Pricing Power in Action

PepsiCo (NASDAQ: PEP) remains a steady performer during inflationary stretches thanks to its pricing power and diversified product mix. The company’s strong brand equity across snacks and beverages—anchored by its Frito-Lay, Gatorade, and Pepsi brands—enables it to pass higher input costs to consumers without a significant decline in demand.

In the last two years, the company has had to manage higher input costs for sugar and packaging. However, the company has balanced those price increases with cost-control measures and supply chain efficiencies.

The company’s robust global footprint also insulates it from regional economic soft spots, while its growing lineup of zero-sugar and functional products supports pricing flexibility. Even with moderation in volumes, higher pricing has supported steady revenue growth and stable margins.

A core concern about PEP stock in the last year has been its valuation. However, at 16x forward earnings, the stock looks more attractive. And any help the consumer gets from tax refunds and economic growth could make the 12-month earnings projection of around 6.5% look very conservative.

Lifeway Foods: A Small Cap with Strong Margins

Lifeway Foods (NASDAQ: LWAY), best known for its kefir yogurt products, offers a niche play on resilient consumer demand for nutritious, probiotic-rich foods. The company has maintained strong gross margins—above 25% in recent quarters—despite volatile dairy prices. Lifeway’s success lies in strategic sourcing and a focus on value-added, health-oriented products that appeal to a loyal, premium-minded customer base.

The company’s agile cost structure allows it to pivot quickly to changing market conditions, which is vital when inflation pressures squeeze smaller brands. In addition, its expanding distribution across major retailers, along with steady international growth, creates multiple levers for long-term expansion.

Investors should note that the microcap nature of this stock adds volatility, but that also brings upside as the company scales. As consumers prioritize health over discretionary spending, LWAY looks well-positioned to deliver inflation-resistant growth. And with expected earnings growth of around 28% in the next 12 months, the consensus price target of $34 as of Jan. 9 may be too low.

Freeport-McMoRan: A Hedge Against Rising Input Costs

Freeport-McMoRan (NYSE: FCX) remains one of the best natural hedges against inflation. The company is a leading global producer of copper, the metal that underpins everything from EVs to data centers. When inflation persists, commodity prices tend to rise, and that often benefits miners like FCX.

With copper demand expected to outstrip supply through the decade, Freeport is well-positioned to capitalize on structural shortages. It’s also an indirect play on gold, which will continue to be a debasement trade in 2026.

Operationally, FCX has managed costs effectively even as mining inputs and labor expenses rise. The company’s balance sheet remains strong with relatively low debt, giving it flexibility to invest in new production and shareholder returns. With inflation sticky and industrial activity stabilizing in China, copper prices could stay firm or move higher in 2026. That makes FCX not just a cyclical play, but a strategic inflation hedge in diversified portfolios.

The Bottom Line: Staying Invested in Pricing Power

Sticky inflation doesn’t have to derail portfolios. The key is holding companies that can pass along higher costs or benefit directly from rising prices.

• PepsiCo shows how brand strength supports pricing discipline
• Lifeway demonstrates the advantage of flexible, margin-conscious operations
• Freeport-McMoRan captures upside from commodity-driven inflation

Collectively, these stocks highlight resilience across distinct sectors: consumer staples, small-cap growth, and natural resources, providing investors with multiple ways to stay on the right side of persistent price pressures.

But what should you look for? Let’s take as a given that investors should look for stocks with a dividend yield of around 3%. The most recent, if not necessarily reliable, inflation data we have puts inflation around 2.7%. It’s too early to tell if inflation will increase as monetary power loosens and stimulus is added to the economy. Nevertheless, a dividend of at least 3% will be needed to keep your investments ahead of inflation. 

These stocks provide investors with the benefit of reliable quarterly distributions that you can accept as cash in your bank account or that you can reinvest to increase your position in the stock.  

However, you should expect more from dividend stocks than reliable income. The stocks on this list also have a history of delivering a solid total return, which includes stock price appreciation to go along with a growing dividend. That’s how you maximize the benefits of compounding.  

Dividend Stocks to Buy: AbbVie

AbbVie Inc. (NYSE: ABBV) is hardly considered a comeback story. ABBV stock is up nearly 30% in 2025, and analysts are raising their price targets for the next 12 months. Outside of a company like Eli Lilly & Co. (NYSE: LLY), which is in a dominant position in the GLP-1 market, it’s been a rough year for pharmaceutical stocks. 

The key for AbbVie is that the company has successfully replaced the revenue it’s losing as its blockbuster Humira drug reached the patent cliff. But AbbVie’s patent-protected Skyrizi and Rinvoq are picking up the slack, and the company has a deep pipeline and a robust balance sheet that gives the company the firepower to get them across the finish line. 

AbbVie is also a dividend king, meaning it’s increased its dividend for at least 50 consecutive years. The yield as of this writing is 2.84% and is well covered by the company’s cash flow.  

Dividend Stocks to Buy: Bristol-Myers Squibb 

Bristol-Myers Squibb Co. (NYSE: BMY) has had a challenging few years as investors have cooled on large pharmaceutical names facing patent expirations. But value-minded dividend investors may find an opportunity as the stock appears deeply discounted relative to its historical valuation. The company trades at a forward P/E under 10 and offers a dividend yield in the 4.9% range—well above the market average. 

The fundamentals remain solid. Bristol-Myers is focusing on expanding newer drugs like Eliquis, Opdivo, and Reblozyl while investing in its pipeline of oncology and immunology therapies. Near-term results may stay lumpy, but with a steady cash flow profile and consistent earnings support, the dividend looks safe.

For contrarian investors, BMY provides a classic example of a high-yield stock with stabilization and upside potential if sentiment improves in 2026. 

Dividend Stocks to Buy: Pepsi 

PepsiCo Inc. (NASDAQ: PEP) offers a blend of income reliability and defensive growth that fits well in a 2026 portfolio rotation. While consumer staples stocks have lagged during the speculative surge into AI and tech, that underperformance has set the stage for better entry points. PepsiCo’s diversified product portfolio, from beverages to snacks, gives it pricing power and resilience even in a slower economy. 

The company has increased its dividend for more than 50 years, placing it among the Dividend Kings. Its yield of roughly 3% is comfortably above inflation, and its payout ratio of around 70% indicates room for further growth. As input cost pressures ease and global demand normalizes, PepsiCo looks positioned for mid-single-digit earnings growth alongside continued capital returns. 

Dividend Stocks to Buy: Enbridge 

Next on my list is Enbridge Inc. (NYSE: ENB), which is an energy infrastructure company. For starters, Enbridge has a high-yield dividend of 5.66% as of December 26. An above average yield can be a value trap, but that doesn’t appear to be the case with Enbridge.  

The catalyst is likely to be the company’s positioning with heavy crude oil. This is the type of crude oil needed for applications like diesel fuel. Unlike light crude oil, heavy crude inventories are low. That means countries with heavy oil resources, such as Canada, will benefit.  

Enbridge is the largest transporter of Western Canadian select. And the company has long-term contracts, a stable tolling model, and expansion opportunities that give investors exposure without the upstream risk.  

Dividend Stocks to Buy: Texas Instruments 

Texas Instruments Inc. (NASDAQ: TXN) stands out in the semiconductor space as one of the most dependable dividend payers. While many chipmakers lean heavily on cyclical end markets, TI’s strategy focuses on analog and embedded chips used in long-duration industrial and automotive applications—segments that provide stable, recurring demand. 

The company has raised its dividend for 20 consecutive years, and at a current yield near 3.3%, TXN offers an appealing blend of income and long-term growth. With its disciplined capital allocation, massive free cash flow generation, and conservative balance sheet, Texas Instruments embodies the kind of steady compounder that dividend investors can hold through multiple market cycles. 

The Bottom Line on High-Powered Dividend Stocks for 2026 

As the market transitions from speculative tech toward more income-focused investing, dividend stocks are regaining their appeal. The five companies highlighted here: AbbVie, Bristol-Myers Squibb, PepsiCo, Enbridge, and Texas Instruments, combine reliable dividend growth with the potential for solid total returns. 

They operate in diverse sectors, ranging from healthcare and consumer staples to energy and semiconductors, providing investors with balance and resilience across different market conditions. In 2026, when interest rates may finally stabilize and inflation holds near current levels, long-term dividend payers like these could quietly outperform, rewarding patient investors with steady income and compounding gains over time.