Coke or Pepsi? We prefer Dr Pepper Snapple Group (NYSE: DPS), since the “un-cola” company is offering investors a refreshing combo of low valuation and rising dividend.

In 2008, Dr Pepper was spun off from Cadbury Schweppes, now part of Kraft Foods (NSDQ: KRFT). And it does virtually all its business in North America. Carbonated beverages, including Dr Pepper, 7-Up, Canada Dry, Sun-Kist and A&W — are most of its revenue (80 percent), with the rest coming from non-fizzy drinks like Snapple, Mott’s and Hawaiian Punch.

Since going solo, Dr Pepper has maintained its title as the leading un-cola company. Around 75 percent of Dr Pepper’s sales are from drinks that are No. 1 or No. 2 in their category. And Dr Pepper’s revenue is rising about as much as that of Cola-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) – 3 to 4 percent annually.

Due to cost-cutting and share repurchases, Dr Pepper is seeing earnings growth of about twice that rate – 6 percent annually. And it has these other major benefits: a higher dividend yield, recently at 3.24 percent vs. 2.8 percent for the cola giants; and lower valuation, recently trading for 15 times 2013 estimated earnings vs. about 20 times for Coca-Cola and PepsiCo and close to 25 times for the beverage industry average.

Expanding retail distribution. Dr Pepper has only 17 percent of the US soft drink market vs. 40 percent for Coca-Cola and 30 percent for PepsiCo. Yet Dr Pepper has managed to increase its sales and market share by adding about 18,000 more specialty retail outlets to its distribution channel, such as the 7-Eleven and Subway chains.

New products for health-conscious consumers. This spring, Dr Pepper began a national marketing campaign for 10-calorie versions of its carbonated drinks, called TEN. Launched in 2011, TEN can be found in 65 percent of US grocery stores, and comprises about 10 percent of Dr Pepper’s $6 billion in revenue. Sales volume is up 1.2 percent in the past year while sales of Cola-Cola diet drinks have been falling.

International expansion. While Dr Pepper now gets 93 percent of its revenue from North America, it’s starting to look abroad. In March, it acquired the rights to distribute some of its juices and teas in Asia (previously held by Mondelez International (NSDQ: MDLZ). And we think its first target is likely to be Asia’s readyto- drink tea market, valued at $2.6 billion annually.

Continued efficiency improvements. Most of Dr Pepper’s revenue (67 percent) comes from making, bottling and distributing its own drinks. This is a capital-intensive business that requires scores of manufacturing plants, distribution centers and thousands of delivery trucks.

Yet, Dr Pepper has gross profit margins of around 58 percent on this segment, comparing favorable with Coke’s 60 percent and Pepsi’s 52 percent. In an ongoing effort, Dr Pepper has cut out $94 million annually from its cost structure since 2010, due to inventory and supply chain improvements.

High-margin concentrates business. About 20 percent of Dr Pepper’s revenue comes from selling concentrate of its beverages mostly to Coca-Cola and Pepsi- Co bottlers. Operating out of a single plant in St. Louis, MO, the concentrate division has high profit margins, and brings in 60 percent of Dr Pepper’s profits.

Good growth prospects and strong finances mean Dr Pepper isn’t likely to disappoint. From 2009 to 2012, the company bought back 17 percent of its shares, and it continues to reward investors with share repurchases and dividends. In March 2013, the dividend was raised 12 percent.