The top 7 list was derived from the expected returns of each stock. We calculate expected returns based on a projection of earnings-per-share growth, dividend yields, and changes in the valuation multiple. The 7 consumer staples stocks are ranked by 5-year expected returns, from lowest to highest. Further, consumer staples are important for portfolio diversification. Also, because these stocks tend to perform in a way counter to the consumer discretionary sector in market recessions, they can help bring balance to a portfolio. When it comes to the best consumer staples stocks, Procter & Gamble (PG, $140.01) is the go-to company for many investors.
It is focused on value-conscious consumers who are looking to pinch pennies, which makes it one of the more stable merchants out there when times are tough. Tobacco products giant Altria Group (MO, $48.07) is the company behind Marlboro cigarettes, Black & Mild cigars, and smokeless tobacco products like Copenhagen and Skoal. Founded in 1822, this is one of the oldest and most respected tobacco companies in the world.
This is because investors sometimes pay more for a company with premium earnings, as can be seen from some of the most expensive stocks on the market today. They tend to be less volatile than other sectors, providing a measure of stability and downside protection heiken ashi in a portfolio. They also offer the potential for income and capital appreciation, as well as the potential to hedge inflation. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
Pros and Cons of Investing in Consumer Staples Companies
The company does not pay a dividend but has produced a strong annualized return over the past 15 years of 21.7%. The company’s sales are split 55% to developed markets and 45% to fast-growing emerging markets. North America and South America are the largest regions in terms of sales. The latest GDP report shows economic growth slowing down in the first quarter of this year vs. the fourth quarter of 2022. Specifically, GDP increased 1.1% annually vs. 2.6% in the prior quarter. The slowdown adds fuel to the argument that the U.S. is headed for recession later this year.
For those looking to find strong Consumer Staples stocks, it is prudent to search for companies in the group that are outperforming their peers. Adecoagro (AGRO Quick QuoteAGRO – Free Report) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? By taking a look at the stock’s year-to-date performance in comparison to its Consumer Staples peers, we might be able to answer that question. With many analysts still predicting a recession in 2024, consumer staple stocks could be a wise choice at this point. More immediately, if you think there’s likely to be a September rally, consider adding these three consumer staple stocks before liftoff. Nu Skin’s anti-aging and skin-related products include peels, masks, scrubs; moisturizers; body care, hair care, men’s care, oral care, sun protection, and cosmetics.
As a mainstay of cupboards and medicine cabinets around the world, PG provides a steady revenue stream and reliable dividend, as a result. Specifically, P&G has been paying a dividend for 132 consecutive years since its incorporation in 1890, and it has increased its dividend for 66 years straight. However, Altria has been through a lot in the last 30 years or so and has learned how to operate in the current environment through a focus on margins and shareholder value. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
The difference between an ETF and index funds is that investors do not own the assets an ETF tracks but instead own part of the ETF itself. With index funds, however, it’s similar to buying a basket of stocks of many different companies. These companies have solid fundamentals, have shown consistent growth, and have a history of paying dividends. In addition, consumer staples stocks have benefited from several tailwinds in recent years. The aging of the population has led to increased demand for healthcare products and services.
This fund invests in a wide range of companies, including food and beverage companies, household products companies, and retailers. There are a few things to consider when choosing a consumer staples stock ETF. A lower expense ratio means more of your investment goes into the actual fund, so choosing an ETF with a low expense ratio is important. You’ll want to ensure the fund invests in a diversified mix of consumer staples stocks so you’re not too exposed to any company or sector. Past performance is no guarantee of future results, but it can give you an idea of how the fund has performed in different market conditions.
#40 – US Foods
Changes in the regulatory environment can lead to higher costs and lower business results. These are the items that pop up on your shopping list repeatedly—things like paper towels, soap, toothpaste, cigarettes and soda. Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008. His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money. Kellogg (K, $68.38) boasts some of the most popular brands on the planet, including Froot Loops, Pringles, Pop-Tarts, Cheez-Its and more.
- Colgate-Palmolive produces personal care, home care and pet care products under popular brand names like Colgate, Irish Spring, Lady Speed Stick, Ajax and Hill’s Science Diet.
- In fact, consumer staples was the single best performing sector during calendar year 2008.
- Worldwide, Walmart gets more than 260 million customer visits each year.
- As a result, consumer staples stocks are considered defensive investments that can help balance a portfolio and provide a source of stability and income.
Breaking things down more, Adecoagro is a member of the Agriculture – Operations industry, which includes 16 individual companies and currently sits at #94 in the Zacks Industry Rank. Stocks in this group have lost about 21.7% so far this year, so AGRO is performing better this group in terms of year-to-date returns. This group includes 194 individual stocks and currently holds a Zacks Sector Rank of #13. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group. Coca-Cola stock rounded out a lackluster eight-day stretch of trading Friday, weighed down by investor concerns over the consumer staple sector.
This sector presents a compelling investment opportunity for those seeking stability and long-term growth potential. The composition of a consumer staple ETF may vary depending on the specific ETF. In contrast, others, like the Vanguard Consumer Staples ETF, may focus on a broader range of companies that make consumer staples products. As a result, investors should carefully consider the composition of the ETF before investing to ensure that it aligns with their investment goals and risk tolerance. First of all, consumer staples stocks are very recession-resistant by definition. Consumer staples companies make products or deliver services that are considered to be ‘staples’ – in other words, consumers can’t do without them.
Consumer Staples FAQs
Another benefit of these companies is that downturns help improve the company’s valuation. The business model helped to successfully carry Costco through the pandemic and remains strong today. The company recently reported that its same-store sales rebounded in July of this year, rising 2.5% compared with a year earlier, after declining in May and June. Costco said the July increase was driven by strengthening food sales. The company announced earlier this year plans to crackdown on people who share membership cards to access its warehouse clubs, a move that should bolster Costco’s finances moving forward. Human nutrition and health, animal nutrition and health, specialty products, and industrial products are its four business segments through which it conducts its operations.
Look for companies with strong balance sheets and a history of profitability. These companies are more likely to weather economic downturns and continue to pay dividends. When assessing a company’s ongoing ability to pay dividends, one factor to consider is its dividend payout ratio, which is measured as a percentage. On May 3rd, 2023, Nu Skin announced Q results, reporting quarterly earnings of $0.37, beating market estimates by $0.04. In addition, the company reported revenues of $481.46 million for the quarter, down 20.4% year-over-year.
Types of Companies in the Consumer Staples Sector
Notably, the organic sales gain was driven by a mixture of higher volume, price increases, and selling more higher-priced items. The company is riding 18 years of consecutive dividend increases, and has paid dividends in some form since 1925. That provides a solid yield on top of tremendously consistent share performance, which is why K is on this list of the best consumer staples stocks. In 2023, SJM joined the list of Dividend Aristocrats, stocks that have provided at least 25 consecutive years of growth in their distributions.
Types of Consumer Staples Stocks
This sector includes food and beverages, personal care, and home appliances. The consumer staples sector is generally considered defensive because consumer demand for basic goods and services is relatively insensitive to economic cycles. More importantly, the consumer https://bigbostrade.com/ staples sector has outperformed the S&P 500 during the last three recessionary periods—or periods of negative growth in the gross domestic product (GDP). Due to their low volatility, consumer staples stocks are considered to play a key role in defensive strategies.
Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. The U.S. 10-year Treasury yield stands at 3.4%, while the consumer staples sector is offering a dividend yield of 2.7%, according to Refinitiv data.
Adjusted EBITDA came to $2.02 billion, which was much better than the $1.81 billion expected. Target posted first quarter earnings on May 17th, 2023, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $2.05, which was 29 cents better than expected. Revenue was up fractionally year-over-year to $25.3 billion, beating estimates by $40 million. Target reported fourth-quarter and full-year earnings on February 28th, 2023, and results were better than expected on both the top and bottom lines and by wide margins. “You get more defensive in periods of economic stress… but earnings will triumph for the next couple of weeks,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
The company has a relatively narrow focus on energy drinks but has recently moved into the alcohol sector with a malt beverage offering. Nonetheless, Estee Lauder has been a top performer, more than doubling the S&P 500’s roughly 60% return over the past five years. However, that includes a more dramatic ascent and a much steeper decline during the 2022 bear market, highlighting the volatile nature of the sector.
In addition, consumer staples companies often have established brand names and loyal customer bases, which can provide a degree of protection against competition. Security can make them more attractive to investors looking for companies with long-term growth potential and stability. Thanks to these qualities, consumer staples stocks can show relative strength in their share prices when the investing climate is rocky. Investors looking for safety will seek greater exposure to predictable, reliable business models—which is where many consumer staples stocks shine. They include daily essentials such as food and beverages, personal care products, household and home care products such as paper goods, and alcohol, tobacco, and cosmetics. But it’s also worth noting that shares are up about 42% in the last 12 months, compared with a nearly 9% decline for the broader S&P 500.
To skip the market analysis of consumer staple stocks, go directly to the 5 Best Consumer Staple Stocks. We use essential products daily, from food, beverages and personal care items to household essentials like cleaning supplies and toiletries. These products are generally resistant to changes in consumer behavior and economic conditions and are considered safe and reliable investments in times of uncertainty. Consumer staple ETFs typically invest in many companies, including large- and mid-cap stocks. These companies often have established brand names, a history of stable earnings and dividends, and a relatively low level of volatility compared to other sectors. These factors make them attractive to investors looking for a more stable and defensive investment option.