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. Index funds that track the consumer staples sector can expose investors to a defensive sector while still allowing them to benefit from the overall market growth. These funds can be a good choice for investors who are looking for stability and income.
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. Consumer staples Binance cryptocurrency exchange shares were the biggest losers in the S&P 500 on Friday. That was bad news for stocks of companies like Costco, Walmart, Church & Dwight and Mondelez. Comprising nearly 70% of the nation’s gross national product (GNP), consumer spending holds a lot of sway over the economy.
Although costs are expected to be more stable in the second half, they’re likely to continue rising. It’s difficult to see how the group can offset these rising costs given the performance this year, and that’s part of the reason Heineken lowered its 2023 outlook. Loreal’s annual revenue for 2022 was $40.311 billion, an increase of 5.53% from the previous year. Anheuser-Busch InBev SA/NV, a Belgium-based company, produces, distributes, and markets beer, alcoholic beverages, and soft drinks.
So investors in the asset accumulation phase may prefer to take on more risk and volatility in the pursuit of higher average returns and growth potential. But the term “consumer staples” may be more lenient than some investors realize. For example, folks don’t need Coca-Cola and Pepsi products in the same way that they use detergent, toothpaste, or paper towels. Candy and sugary snacks made by Mondelez (owner of Oreo) and Hershey are delicious, but are certainly not essential parts of a nutritious diet. Rather, “staples” is more or less a loose term for relatively low-cost products that people buy regularly, even if they don’t absolutely need those products. Procter & Gamble is a consumer goods company that makes everything from personal hygiene products to detergents, cleaners and other household products.
- However, its other brands include Blow-Pops, Andes mints, Dubble Bubble gum, Razzles, Cry Baby sour candies, and many others.
- CTVA also supplies products to the agricultural input industry that protects against weeds, insects and other pests, and diseases as well as enhances crop health.
- 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 that light, the 5% to 7% annual increase in operating income doesn’t seem bad. The company said it would drive savings by minimizing complexity, tapping consulting firm Accenture to help streamline the business, and it sees normalization in the supply chain. At least $200 million in operating income will come from review a complete guide to the futures market that initiative. It also sees at least another $25 million coming from capturing incremental value from M&A synergies and its Jennie-O transformation. However, its goal of adding $250 million in operating income by 2026, or a compound annual growth rate of 5% to 7%, seemed to fall short of investor expectations.
Consumer Staples Stock Share Performance
But unlike a risk-free 10-year Treasury note — which yields 4.6% but features zero growth — the ETF provides upside potential by investing in a conservative sector of the economy. 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. Regardless of the reason, the performance of Tootsie Roll lately makes it stand out among 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.
Dividends are another way to directly allocate capital to shareholders instead of reinvesting in the business. All told, consumer staples companies offer a nice blend of value and income. People buy staples in boom times and in bust times, which makes consumer staples stocks good performers no matter what’s happening in the broader economy.
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Thus, firms in this industry can benefit from higher product prices because consumers still have to buy these goods. In addition, firms can compensate for higher input costs by being more efficient or by passing on some of the costs to consumers. Buoyed by the persistent demand of their products, consumer staples companies generate consistent revenues, even in recessionary periods. bitfinex review As a result, consumer staples stocks decline far less during bear markets than stocks in other sectors. With some products, such as food, alcohol, and tobacco, demand sometimes actually increases during economic downturns. The consumer staples sector also often lures investors with its components’ rich dividend yields, which tend to be larger than those generated in other sectors.
Best consumer staples stocks to buy in 2023
Since these companies sell goods such as food and cleaning products that consumers rely on regardless of the state of the economy, they tend to generate solid profits even in weak economies. 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. 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.
Scandals in this space tend to come with expensive long-term consequences. In the current environment, where price hikes are all but inevitable, these companies can’t afford to let a scandal drag their reputation through the mud. The consumer staples segment is a relatively defensive segment of the market.
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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. Many of the major investment companies offer some consumer staples play. Vanguard, for example, offers VDC, a consumer staples ETF, and a Consumer Staples Index mutual fund. Invesco has PBJ, its dynamic food & beverage ETF, along with a more general S&P SmallCap Consumer Staples ETF. The consumer staples sector has outperformed all but one sector since 1962.
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. Investing in companies that make products people buy day-in and day-out is a smart way to weather an economic storm, but there are some consumer staples stocks to sell which are the exception to that rule. A consumer staples stock includes a whole range of companies— from over-the-counter medicines to household products, food and even alcohol and tobacco. Consumer staples stocks function in a non-cyclical manner, meaning they offer investors safety during recessionary climates.
And it is moving more into snack bars and away from traditional cereal. In light of this circumstance, investors would prefer to focus on sectors, such as the consumer staples sector, that are thought to be more stable and recession-proof. In this article, we will take a look at the top 20 largest consumer staples companies in the world. McCormick & Company is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry.
In its Investor Day conference today, Hormel, which is best known for Spam and other protein-centric brands, discussed a number of initiatives it’s focused on to continue growing the business. Consumer staple companies will “be able to keep putting up solid earnings growth even as most other industries will experience down numbers,” Cramer said. The Fed raised interest rates by 50 basis points Wednesday, breaking its streak of four consecutive 75-basis-point increases, and forecast hiking rates through next year.
The negatives here, which include the failure to consummate a high-profile acquisition, have left the shares with a historically high dividend yield of about 4.2%. What’s most interesting, however, is that activist investor Nelson Peltz – who was instrumental in turning Procter & Gamble’s business around – has been added to Unilever’s board of directors. Consumer staples companies can grow by selling higher-margin products in their product mix, increasing prices, or achieving higher sales volume. Shifts toward more expensive products in the product mix and pricing power are easier to achieve during a strong economy.
The rise of the middle class in developing countries has led to increased demand for consumer staples products. The consumer staples sector consists of companies providing basic goods and services. 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.
Under-performing consumer staples stocks tend to be those that don’t strike the right balance with their pace of price increases. While consumers tend to be willing to stomach some price increases for their favorite brands, their patience isn’t unlimited. At some stage they’ll slide down the value chain and volumes will take a hit. Most consumer goods companies pay a pretty penny for marketing to protect their brand, so when volumes start to decline it can mean their expensive efforts are in vain. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.