Coca-Cola (NYSE: KO) and Altria (NYSE: MO) are both classic consumer staples plays for income investors. Coca-Cola is one of the largest beverage companies in the world, and Altria owns Marlboro, the top-selling cigarette brand in America. Both of these stocks might seem like solid long-term investments.

But over the past 10 years, Coca-Cola stock has gained 64% while Altria stock rose just 8%. On a total-return basis that includes reinvested dividends, the gap narrows: Coca-Cola generated a total return of 125% while Altria delivered a total return of 103%. But which is the better all-around stock for conservative investors from here?

Coca-Cola's business is still sparkling

Sales of Coca-Cola's carbonated drinks have slowed over the past few decades as soda consumption rates declined across the world. But to counter that trend, the company expanded its portfolio with more brands of fruit juices, teas, bottled water, energy drinks, coffee, and even alcoholic drinks. It also refreshed its flagship sodas with new flavors, smaller serving sizes, and healthier versions to attract younger consumers.

Coca-Cola's organic sales declined by 9% in 2020 as restaurants and other dine-in businesses shut down during the pandemic. That slowdown across the food service sector offset its stronger sales in supermarkets and other retailers. But after those tailwinds dissipated, organic sales increased by 16% in both 2021 and 2022.

In 2023, the company's organic sales were up by another 13%, a rise powered in part by its price hikes during the 2022-2023 period of higher inflation. In 2024, it expects that metric to rise by a further 9% to 10% and for its comparable EPS to grow by 5% to 6%. At $70, Coca-Cola's stock still looks reasonably valued at 25 times the midpoint of this year's earnings outlook, and pays a healthy forward dividend yield of 2.8%. Coca-Cola is also a Dividend King, with a streak of 62 consecutive years of payout hikes.

Altria's core business is going up in smoke

Altria spun off its international business as Philip Morris International in 2008. After that, Altria generated most of its revenue from the U.S. market, where it struggled with declining smoking rates and market share losses.

From 2018 to 2023, Altria's annual cigarette shipments dropped from 109.8 billion sticks to 76.3 billion sticks as Marlboro's retail market share shrank from 43.1% to 42.1%. (The Marlboro brand, in turn, accounts for about 90% of Altria's cigarette sales volume.) In response to those shrinking volumes, Altria repeatedly raised its prices per pack, reduced its spending, and bought back shares to squeeze more EPS growth out of its stagnant revenues.

Altria also gradually diversified its business away from cigarettes with smoke-free products like snus, heated tobacco, e-vapor, and e-cigarette products, but it still generated 87% of its revenue from cigarettes and cigars in 2023. The company's best hope is to keep expanding its portfolio of non-smokeable products through acquisitions to reduce its dependence on its shrinking cigarette business, but that strategy probably won't halt its long-term decline.

For 2024, analysts expect Altria's revenue to decline by 1% as its adjusted EPS rises just 3%. From some perspectives, its stock could be viewed as cheap at 10 times forward earnings, and it still offers an impressive forward dividend yield of 8.2%. However, with its anemic growth and long-term challenges, it could be a high-yield trap.

The better buy: Coca-Cola

Coca-Cola operates an evergreen business, but Altria is running out of steam, and it won't be able to keep raising its prices and cutting costs indefinitely to offset the impact of its shrinking sales volume. That difference may help illustrate why Warren Buffett's Berkshire Hathaway still holds Coca-Cola as one of its top holdings, but doesn't own a single share of Altria.

Altria won't go bankrupt anytime soon, but it could continue to underperform Coca-Cola, other blue chip consumer staples stocks, and the broader market. Its low valuation and high yield should limit its downside potential, but investors shouldn't put too much faith in its ability to aggressively expand its smokeless portfolio to offset declining cigarette shipments.

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Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

Best Stock to Buy Right Now: Coca-Cola vs. Altria was originally published by The Motley Fool