With a 4.2% yield and low valuation, is it mad to ignore Britvic plc?

It's not been a great couple of years for holders of Britvic(LSE: BVIC). Peaking at 775p back in March 2015, shares in the company exchanged hands for just 589p yesterday -- 24% less. That's quite a fall for a company with an enviable portfolio of 'sticky brands' operating in what should be a fairly resilient industry. However, I think today's trading update might enough to change the market's view of the stock. Here's why.

///>

Regaining its fizz?

Overall, first quarter revenue rose a respectable 4.3% on the prior year to £351m, with volume growth up 3.9%. Although revenue from its GB operations was fairly subdued at 2.2% (with 'Stills' declining 3.8%), sales in France and Ireland were more buoyant, increasing 6.3% and 6.4% respectively.

The numbers from Britivic's international division were even better. Sales here rose a very healthy 19.8% with both the USA and Brazil performing well. That's compared to the 13.8% decline in revenue experienced in Q1 last year.

Despite reflecting that the economic environment remained "challenging", CEO Simon Litherland also commented that the company was confident that its full year results would meet market expectations thanks to its "marketing and innovation plans" and "cost saving initiatives".

Trading on just twelve times earnings for 2017 (falling to 11 in 2018), shares in the UK Pepsi producer certainly look cheap. A yield of 4.2% for 2017 -- forecast to rise to just under 4.5% in 2018 -- will also be highly attractive to income seekers. Perhaps most importantly, these payouts look secure for now with cover of 1.92 in the current year.

Not everything is completely rosy. Following an extensive rise in capital expenditure last year, free cash flow is now looking decidedly less healthy. Operating margins, while respectable at around 12%, are also far lower than those of industry peers. Moreover, net debts of £576m are starting to stretch the balance sheet somewhat, given that net profits are only expected to hit £123m this year.

Box ticker

Those more concerned with debt than dividends may prefer market peer, Nichols(LSE: NICL). With a net cash position of just under £33m, the Newton-le-Willows business presents as the epitome of financial discipline.

It doesn't stop there. As a company, Nichols ticks a lot of boxes. Massive returns on capital? Tick. High operating margins? Tick. Consistent annual earnings per share growth? Tick.

The only problem with this is that shares in the business are now rather expensive to buy. A P/E of 23 for 2018 will be too much for some, regardless of the company's quality.

There's also the fact that -- as far as dividends are concerned -- the AIM-listed maker of Vimto will never set the world alight. A yield of 1.76%, albeit healthily covered, is clearly far below that offered by Britvic. It's also significantly less than investors could get from a bog-standard main market tracker, without any of the associated risk of buying into an individual company.

Nevertheless, what investors in Nichols have missed out on in the form of dividends has been more than made up for in terms of capital gains. £5,000 invested in the stock roughly 10 years ago,would now be worth almost £28,000. That's without reinvesting dividends, minimal though they are.

Given that earnings estimates at Nichols look considerably better than those at Britvic, I'd be more tempted by the former at the current time. That said, I wouldn't be surprised if today's update from the latter encouraged some investors to take a fresh look at the company.

Calling all growth hunters

If companies showing the potential for strong earnings growth flick your investing switch, then you really should check out a special report from the Motley Fool. They've identified another top growth share -- a top British brand that looks set to increase its global footprint massively over the next few years.

Click here for your copy of their report. It's completely FREE and without obligation.

Paul Summers has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.