Pepsi Underperformance Makes it a Smarter Buy, Says Jim Cramer

PepsiCo's stock has been stagnant over the past five years, while Coca-Cola's shares have surged by over 80%. Despite this underperformance, Jim Cramer believes that Pepsi is the smarter buy right now. He points out that the company's dividend yield has reached a high of 4% due to its lower valuation.

Pepsi raised its quarterly payout to $1.48 per share, marking the 54th consecutive annual increase in dividends. The company also authorized a $10 billion buyback program through February 28, 2030. In contrast, Coca-Cola's dividend yield is significantly lower at 2.32%.

Cramer argues that Pepsi's underperformance makes it undervalued compared to Coca-Cola. He notes that the share price of a company does not necessarily reflect its valuation. However, Pepsi's Q2 revenue rose by only 6.4%, which was lower than expected due to softer US impulse channels.

Coca-Cola, on the other hand, reported strong Q2 results with adjusted EPS of $0.97 and revenue of $13.380B, up 6.74% YoY. The company also raised its full-year guidance calling for comparable EPS growth of 9 to 10%. CEO Henrique Braun said, 'We delivered a strong quarter with broad-based momentum across our business.'