Coca-Cola, Pepsi, and Hormel are all great dividend stocks. But the reason I chose 1 over the other 2 is simple.

If you’re an investor looking for safe dividend investments, looking at our Dividend Kings list is a good place to start. All of these companies have been paying and increasing dividends for over 50 years. That doesn’t mean the soap opera will continue forever. In fact, companies are often left off the list. But it does show which companies boast operational excellence and prioritize shareholder returns.

The three companies on the Dividend Kings list are beverage giants. coca cola company (Watt-hours 0.25%)Cola’s biggest rival pepsico (prototype 0.83%)food company Hormel Foods (HRL 0.11%). But from an investment perspective, these three companies share much more similarities than dividend longevity.

First of all, dividend investors like to consider a stock’s dividend yield before investing. This is the amount the investor received for the value of his or her investment over the past year. The chart below shows that Coca-Cola, Pepsi, and Hormel all have dividend yields close to 3%, giving investors $3 for every $100 invested.

KO Dividend Yield Data from YCharts

Dividend investors also like to consider a company’s payout ratio to assess the riskiness of an investment. This measures the percentage of a company’s earnings that goes to dividends. Generally speaking, lower is better. However, Coca-Cola, Pepsi, and Hormel have similar payout ratios of 74%, 74%, and 76%, respectively.

So when you look at consecutive dividend payments, dividend yields, and payout ratios, there is no clear winner between Coca-Cola, Pepsi, and Hormel. If these factors are the same, I think there is another factor to consider. And that makes Hormel the best choice for investors looking to buy one of these three stocks today.

Why I Pick Hormel Stock

Over the next few years, we believe Hormel can grow its profits at a better rate than Coca-Cola and Pepsi. So I like it the most.

Consumers are familiar with Hormel’s chili and Spam. However, most people probably don’t know how many products and brands this company has. And with this portfolio of products, Hormel is on a mission to dominate convenience stores.

Hormel has been in convenience stores for a long time, but many have flown under the radar. For example, investors may not know that the company is number one in pizza toppings, and many convenience stores sell hot pizzas made with Hormel ingredients.

Hormel also sells snacks under the Skippy peanut butter brand, refrigerated snack trays, and microwaveable meals under the Compleats brand.

Hormel already operated convenience stores, but acquired Planters in 2021. Planters is a more pure-play snack brand and has a broader presence in convenience stores. The company can now leverage the distribution of the Planters brand to expand distribution of other Hormel products.

Compared to grocery store sales, Hormel’s profit margins are better on convenience stores and foodservice products. Therefore, growth in this sector can lead to improved profitability. And rising profits provide more room to provide services and increase dividends.

Pepsi stock is close to second place.

Of course, my optimistic expectations for Hormel come with a caveat. I’m expecting things that won’t happen this year to start happening in the next few years. Hormel has already reported financial results for the first quarter of fiscal 2024, providing full-year adjusted diluted earnings per share (EPS) guidance of $1.51 to $1.65.

For perspective, Hormel has adjusted diluted EPS of $1.61 for fiscal 2023. Therefore, this guidance implies a potential decline in returns. I expect growth in the convenience store channel to ultimately have a positive impact in fiscal 2024 and beyond.

This uncertainty about Hormel is why Pepsi stock is a close second for stock purchases today. Pepsi also has a strong path to revenue growth, which makes it a rather straightforward proposition.

Pepsi is looking to international business to grow its profits more than ever. International business revenue increased 6% in 2023 compared to the previous year. However, this resulted in an increase in overseas operating profits of more than 200%. Overseas operating profit accounted for 38% of total operating profit.

“Our international business is now very large,” said Ramon Laguarta, CEO of Pepsi, when discussing the profitability of its international operations. And this scale means the company’s profits grow even further as overseas sales increase. Laguarta also said the company expects to outpace growth in North America again in 2024.

Pepsi therefore has a simple path to earnings growth, which also offers the potential for stock price upside. I still believe Hormel’s potential could rise further in the coming years, but this is something investors should keep in mind.