Consumer staples stocks are a traditional safe haven from uncertainty, which has already proven to be more than abundant over the past 12 months.
The S&P 500 closed 2022 with a total loss of about 18% on the year, its worst annual return since the financial crisis of 2008. Those declines, coupled with stubbornly high inflation, a rising interest-rate environment and uncertainty over the potential for a bigger slowdown in the U.S. economy has many investors seeking out safety.
And one area of the market to find consistency and stability is the consumer staples sector. After all, companies that sell detergent or shampoo or packaged foods will still do a brisk business even if broader spending trends decline.
With that in mind, here are nine of the best consumer staples stocks to buy now. All have something different to offer, and many also pay generous dividends on top of the potential for share appreciation.
Data is as of Feb. 17. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
- Market value: $85.8 billion
- Dividend yield: 7.9%
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.
Admittedly, cigarettes are not a growth business. 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.
In fact, MO stock lost a mere 2% last year, marking it as one of the better-performing stocks in the S&P 500. On top of that, Altria is one of the best dividend growth stocks, having logged more than 50 consecutive years of dividend increases to boast a sustainable and generous payout.
Consumers looking for a tobacco fix will cut back many other discretionary items before they give up on Altria products. This will provide stability in sales and profits for one of Wall Street's best consumer staples stocks, regardless of the macroeconomic environment.
- Market value: $7.2 billion
- Dividend yield: N/A
Celsius Holdings (CELH, $94.84) might not be the most well-known consumer staples stock on this list, but it is worth a mention because it has an impressive track record of growth in recent years. For those unfamiliar, Celsius sells energy drinks and "liquid supplements" under the Celsius name. Its edgy flavors include apple jack'd, inferno punch, and strawberry dragon fruit.
The Boca Raton-based company has been on a tear since 2020, with shares exploding from under $5 a share to almost $100 a share at present. And that's not just because of backwards-looking growth. Estimates are for CELH revenue to double in its current fiscal year, and then grow another 50% in fiscal 2023, as well.
Energy drinks can be subject to fickle consumer tastes, so there's more volatility here. There's also no income stream as Celsius continues to invest heavily in growth plans rather than dividends. But if you're looking for share price appreciation in the consumer staples sector, it's hard to find a better option than this fast-growing stock right now.
- Market value: $260.2 billion
- Dividend yield: 3.1%
When it comes to the best consumer staples stocks, it's hard to top the international powerhouse that is Coca-Cola (KO, $60.12). With a global scale and more than 120 years of operating history, Coke is among the most recognizable brands on the planet and logs consistent sales in any market environment.
Structurally, it's also got a solid baseline of institutional buying interest thanks to KO being a long-time member of the Berkshire Hathaway equity portfolio.
What's more, Warren Buffett's holding company is Coca-Cola's largest shareholder, owning more than 9% of the company. Not only does this provide a great foundation for share prices, but it also creates a strong mandate for dividends as Buffett has always demanded long-term dividend growth from his holdings. In late 2022, the company approved its 61st straight annual dividend increase, proof KO is one of the best dividend stocks on Wall Street that remains dedicated to providing a strong income stream to shareholders.
There are challenges to the brand portfolio, but KO stock isn't standing still as it continues to evolve beyond its namesake Coca-Cola and into brands like Vitaminwater, Fuze teas, Powerade energy drinks and more. Sales are forecast to rise in the mid-single digits this fiscal year and next, showing that Coke is a powerful consumer stock that knows how to connect with its customers.
- Market value: $50.9 billion
- Dividend yield: 1.0%
Discount retailer Dollar General (DG, $227.82) is a nationwide chain that offers everything from cleaning products to packaged food to over-the-counter medicines to holiday items. 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.
Furthermore, Dollar General tends to operate stores with much less square footage than grocery stores or big-box general merchandisers like Walmart (WMT), meaning it can squeeze into urban areas or rural strip malls where there aren't a lot of other good shopping options. Across the U.S. the chain operates nearly 19,000 different locations.
While inflation has eaten away at some consumer staples stocks, analysts are projecting more than 10% revenue expansion this fiscal year and mid-single-digit growth in fiscal 2023. Earnings are also expected to jump 8% to 10% for both fiscal years on top of that.
Shares are up about 15% in the last 12 months. Wall Street has been optimistic about the stock lately, with Morgan Stanley, Piper Sandler and JPMorgan all placing Overweight ratings on DG in January, the equivalent of a Buy.
J. M. Smucker
- Market value: $16.0 billion
- Dividend yield: 2.8%
Best known for its namesake jam, J. M. Smucker (SJM, $149.94) is also the company behind Jif peanut butter, Folgers coffee, Carnation dairy products, and others. These are staples of any kitchen, and provide a lot of reliability to sales.
That stability helps fuel a generous and sustainable dividend. In 2023, SJM joined the list of Dividend Aristocrats, stocks that have provided at least 25 consecutive years of growth in their distributions. What's more, the payout is less than half of SJM earnings per share, so there's ample headroom for payouts going forward from one of Wall Street's best consumer staples stocks.
Looking forward, J.M. Smucker reached an agreement with Post Holdings (POST) to sell off its pet-food brands, including Kibbles 'n Bits, for $1.2 billion. This will help the company keep its debt load low and ensure finances are strong enough to support shareholder value for many years to come.
- Market value: $23.4 billion
- Dividend yield: 3.5%
Kellogg (K, $68.38) boasts some of the most popular brands on the planet, including Froot Loops, Pringles, Pop-Tarts, Cheez-Its and more. That means it's hard to imagine any economic environment where consumers drop Kellogg's offerings from their shopping carts.
While an inflationary environment has been hard on some companies, Kellogg has been able to defend its margins through a series of price increases that consumers have shouldered without cutting back. As proof, management boosted its full-year earnings and revenue expectations after a stronger-than-expected Q3 report in November. Thanks in part to this strong performance, Kellogg has risen about 6% in the last year, while the S&P 500 has declined around 9% in the same period.
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.
- Market value: $49.0 billion
- Dividend yield: 4.0%
Kraft Heinz (KHC, $40.00) isn't just the company behind the popular Mac & Cheese and ketchup brands, but also the firm behind other grocery store mainstays including Philadelphia cream cheese, Maxwell House coffee, Capri Sun juices, Oscar Mayer meats and many other popular products.
If you're worried about big-picture economic trends, then consider the fact that grocery shoppers will continue to load up on these staples even if they cut back on travel or eating out. What's more, KHC stock offers a yield that's more than twice that of the S&P 500. As for its performance on the price chart, Kraft Heinz is up more than 9% in the last 12 months, even as most stocks in the S&P 500 have lost ground in the same period.
What's more, premium brands like Kraft have more wiggle room when it comes to raising prices to offset inflationary pressures. Consider that across the first nine months of fiscal 2022, Kraft Heinz increased its product prices by an average of 12.3%, even as overall sales remained flat. That kind of move simply can't be pulled off by a down-market brand with less loyal customers. If you're seeking a buy-and-hold consumer staples stock with staying power, KHC is worth a closer look.
Procter & Gamble
- Market value: $330.3 billion
- Dividend yield: 2.7%
When it comes to the best consumer staples stocks, Procter & Gamble (PG, $140.01) is the go-to company for many investors. That's in part because the Ohio-based company has been around for almost 200 years. However, it's also because PG is a dominant stock with powerful brands that include Gillette and Braun shaving products; Luvs and Pampers diapers; Tide, Bounce and Downy detergents; Crest and Herbal Essences personal care products; and a host of others.
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.
This company is a classic example of a recession-proof stock, as Americans will do laundry and take showers regardless of the ups and downs in the job market or inflation metrics. Although there's not a ton of growth ahead for such a mature and dominant company, with low single-digit revenue expansion predicted in both fiscal 2023 and fiscal 2024, investors looking for stability will see obvious appeal in PG stock.
Tootsie Roll Industries
- Market value: $3.3 billion
- Dividend yield: 0.8%
Sweets purveyor Tootsie Roll Industries (TR, $46.17) is the company behind the namesake chocolate treats. However, its other brands include Blow-Pops, Andes mints, Dubble Bubble gum, Razzles, Cry Baby sour candies, and many others.
Structurally, TR stock has enviable stability. It's not just the rock solid sales and earnings that show consistency year in and year out thanks to the recession-proof nature of junk food sales. There's also the fact that more than 35% of shares are owned by insiders – including 90-year-old CEO Ellen Gordon who took over the reins from her husband and has been involved in managing the company for more than 50 years.
If you're looking for stability, TR has it in spades. 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. Part of this outperformance is because of longstanding speculation that the company would eventually move out of the closely held nature of its past and get re-energized through an acquisition or private takeover. Regardless of the reason, the performance of Tootsie Roll lately makes it stand out among consumer staples stocks.
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.
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