Breaking News
Get 40% Off 0
😲 Missed the +20.8% surge in our stock strategy last month? Not again! Get premium insights Get 40% Off Now

These 4 Consumer Staple Stocks Can Help Protect Your Portfolio

By The Tokenist (Timothy Fries )Stock MarketsOct 24, 2023 03:56
ph.investing.com/analysis/these-4-consumer-staple-stocks-can-help-protect-your-portfolio-184830
These 4 Consumer Staple Stocks Can Help Protect Your Portfolio
By The Tokenist (Timothy Fries )   |  Oct 24, 2023 03:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
COST
+0.58%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ULVR
+0.04%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
PM
-0.04%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
WBA
+2.13%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

From safest to riskiest, consumer staple companies offer more than essential goods.

Last Thursday, Federal Reserve Chair Jerome Powell framed the economic landscape in dire terms, stating that “the path we’re on is unsustainable.” One could draw many data points to bolster his point. As of September, the budget deficit ran up to $1.7 trillion, a $320 billion increase from 2022.

At the same time as the Fed interest rate hikes attempt to bring down inflation, the USG expenditures on net interest payments rose to $711 billion. In other words, much of economic output is being redirected to avoid the sovereign debt crisis. Consequently, according to Bloomberg economists, a recession is still on the horizon.

Investors look at consumer staple stocks in this time of unsustainability and uncertainty. These companies supply goods that people need regardless of economic cycles, making them recession-proof. In turn, such reliable profit inflow gives them generous dividend yields.

In economic downturns, reliable dividend yield represents a low-risk hedge against wealth erosion. Having reliable income sources from essential goods, consumer staple companies can afford to pay a larger portion of their earnings to shareholders.

If a company’s share is priced at $100 while paying a $1 dividend annually per share, its dividend yield would be 1%. The present industry average dividend yield is 1.7%. With that in mind, which staple stocks to pick and why?

Costco Wholesale Corp

Aptly named wholesale retailer, Costco Wholesale Corp (NASDAQ:COST) maximizes the return on membership-only warehouse sites. This business model keeps operating costs predictable and low while offering bulk discounts. Costco picks the most popular items and then offers them in high volumes.

As of September 2023, Costco attracted nearly 128 million members. With global warehouse-like stores, the company’s goods range from groceries, home goods, and apparel to electronics. Unsurprisingly, Costco’s business model positioned it as a healthy company, with only a 25.8% debt-to-equity ratio.

As inflation pressures people into cost-effective bulk-buying, Costco’s net sales increased 9.4% as of September 3 compared to the prior quarter. For the twelve months ending August 31, Costco’s revenue jumped 8.23%. Year-to-date, COST shares increased 21% in value, currently priced at $555.38 per share.

Based on 29 analysts, Nasdaq consensus places COST stock in the “strong buy” category, with a low estimate of $502 against the high estimate of $680. Although offering a 0.74% dividend yield, there is hardly a better company suited to endure the harshest economic cycles and increase yields during them.

Philip Morris International Inc

Over the years, multiple studies have shown that vaping is healthier than conventional smoking. Although vaping is still less healthy than not indulging in the habit at all, it offers a transitory avenue for over 1 billion smokers.

Philip Morris International Inc (NYSE:PM) has positioned itself as the leading international tobacco company on that road, offering a wide range of nicotine products. These goods are not staples per se but are equally as essential to consumers. Given its ownership of iconic cigarette brands such as Marlboro and Chesterfield, PM has a global reach and competitive advantage.

In a new role as a smoke-free tobacco company, PM’s net revenue has increased 4.3% year-over-year, ending June 30. Although PM missed the expected revenue windfall of $9.17 billion in last week’s latest earnings, against achieved $9.14 billion, new products surpassed expectations.

In particular, the shipment volume of PM’s smokeless Zyn nicotine pouch, following the acquisition of Swedish Match, increased by 65.7%. Such strong diversification away from conventional smoking is why the Nasdaq consensus, across 15 analysts, is a “strong buy.”

The average price target is $109.06, with a high estimate of $120 and a low estimate of $85.5 vs the present price of $90.98 per share. Philip Morris offers one of the highest dividend yields at 5.6%, although it is still lower than the average of 6.1% in the tobacco industry.

Unilever PLC

Unilever PLC (LON:ULVR), a British multinational has over 400 brands under its consumer goods belt. Unilever manufactures and sells a variety of items, from foods and beverages to home care and personal products.

This Thursday, Unilever will release its Q3 earnings report. In the last quarter, the company beat sales growth estimates at 7.9% vs forecast 6.4%. The underlying sales grew by 9.1%. Nasdaq consensus, across 7 analysts, puts UL stock in the “buy” category.

The average price target stands at $229.67 vs the present $48.72, with a low estimate of $44. Unilever’s dividend yield is 3.6%, forecasted to rise to 4.2% in the next three years.

Even Higher but Riskier Dividend Yield

In fiscal 2023, Walgreens Boots Alliance Inc (NASDAQ:WBA) had a net loss of $3.1 billion, vs net earnings of $4.3 billion last year. Yet, the retail pharmacy chain offers the highest dividend yield of 9%. Given WBA’s low debt-to-equity ratio of 31.8%, the company has plenty of space to recover and keep those payouts coming. This includes lowering overall costs and investing in digital initiatives for healthcare delivery.

Year-to-date, WBA stock performed poorly as expected, losing 41% of its value. This puts it into a discounted “buy” category, according to 17 analysts aggregated by Nasdaq. The average price target is $26.89 vs the present $22.18, with a low estimate of $22, which aligns with the bottom at press time.

***

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

These 4 Consumer Staple Stocks Can Help Protect Your Portfolio
 

Related Articles

These 4 Consumer Staple Stocks Can Help Protect Your Portfolio

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email