Coca-Cola and UPS both delivered strong third-quarter results, but their market valuations and dividend yields present very different opportunities for investors. Coca-Cola's shares are trading at about 28 times this year's expected earnings, reflecting its volume-led growth and pricing power. The company reported a 5% increase in volumes, with Coca-Cola Zero Sugar up 16%, and comparable earnings per share (EPS) rising 11% to $0.91. Management raised its full-year EPS growth outlook to at least 11%, or about $3.33 per share.
In contrast, UPS is in the midst of a major turnaround, shrinking its Amazon business to focus on profitability. The company's U.S. Domestic revenue per piece rose 6.1%, and its adjusted operating margin improved, leading to an increased full-year outlook of $7.28 per share in adjusted earnings. Trading at less than 15 times earnings, UPS offers a higher dividend yield of roughly 6.2%, nearly triple Coca-Cola's yield of more than 2%.
When it comes to dividends, Coca-Cola's payout is safer, with 64 consecutive annual increases and ample free cash flow coverage. UPS has also maintained a stable dividend, with CEO Carol Tomé asserting its safety and security. However, UPS's higher yield and lower valuation suggest greater upside potential if its turnaround succeeds. Projections indicate that UPS could deliver higher total returns over the next decade compared to Coca-Cola.
For investors prioritizing safety and durable dividend income, Coca-Cola remains a strong choice. However, those seeking higher yields and growth potential may find UPS a more attractive option, especially if they are willing to accept the associated risks.