If you want to follow in the footsteps of the investment moguls of Wall Street like Warren Buffett, one key place you should look to invest your money is consumer staples. In fact, according to The Motley Fool, about 14.9% of the billionaire’s holdings are in consumer staples stocks. That includes familiar names such as Coca-Cola, Kraft Heinz, and Procter & Gamble, according to U.S. News & World Report.
Buffett sees that minimal volatility and well-charted returns make consumer staples hard to ignore. On top of the minimal volatility, consumer staples equities tend to be great dividend stocks, which already have high dividend yields and produce decent dividend growth. If you’re curious to see for yourself, consider these top consumer staples stocks.
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Best Consumer Staples Stocks to Buy Right Now
Although many consumer staples stocks have a strong track record, there are always some stocks that outperform others in any sector. The stocks listed below arguably have the potential to be the best performing stocks in the category.
1. Coca-Cola Co. (NYSE: KO)
Over the years, consumers have become more conscious of what they’re putting into their bodies when they eat and drink. This has led to some concerns for Coca-Cola because the company’s flagship product is a high-sugar soft drink.
Nonetheless, the company’s stock has seen consistent growth, along with increased revenue, earnings, and dividends. After all, the company holds 47.3% of the non-alcoholic-beverages market share in the United States according to Statista.
When it comes to dividend growth, the company has increased payments to its investors every year for the last 57 years, according to Investopedia, and that trend isn’t likely to stop.
The reason the company has been so successful, even in the face of health-related headwinds, has to do with its diversified portfolio for consumer staples products. Although the company’s flagship product, the Coca-Cola soft drink, is the most successful soda of all time, it’s not the only trick the company has up its sleeve. Coca-Cola is also behind several healthy-lifestyle and energy drink products, including Powerade, Dasani Water, and vitaminwater.
Generating more than $30 billion dollars in revenue annually and seeing consistent growth in earnings per share, Coca-Cola stock is already a strong investment play. Moreover, recent COVID-19-related declines in the price of the stock may be a discounted opportunity to get in on the strong growth expected in the future.
2. General Mills (NYSE: GIS)
General Mills has become a household name as the manufacturer behind popular cereals like Cheerios, Lucky Charms, and Chex. However, the company is no one-trick pony. The company produces everything from yogurt to full meals found in your local grocery retailer’s freezer section.
Over the years, like most big names in the consumer staples sector, the company has a long history of producing organic sales growth, which has equated to growing revenues, earnings, and stock prices on a relatively consistent basis.
The company isn’t shy about showing its investors they’re appreciated either. General Mills is known for returning value to its shareholders through share buybacks and a consistently strong dividend payout. In fact, the current dividend yield on the stock is 3.27%, paying out $1.96 per year to shareholders for each share of stock owned.
General Mills has also shown its resiliency to tough market conditions throughout the course of the coronavirus pandemic. Although many stocks across the market took a big hit earlier in the year, and again leading up to elections, General Mills isn’t one of those stocks. Even through one of the toughest economic and social times in the United States, the stock has seen more than 12% growth year to date, and will likely continue more of the same as the fourth quarter begins.
With a strong history of incredible market performance, competitive dividend payouts, and growth in both revenue and earnings, General Mills has become a prime pick among investors looking to fill a spot in their portfolios and is well worth considering for yours.
3. Clorox (NYSE: CLX)
Clorox is one of the largest cleaning supply companies in the world. Chances are you have one or more of their products under your kitchen sink right now.
Founded in 1913, the Clorox brand has become synonymous with bleach and cleaning supplies. It’s the company behind Clorox Bleach, Tilex, Pine-Sol, S.O.S., Green Works, and a long list of other cleaning products.
The company also has a relatively diverse portfolio of products. Although most of these products are in the cleaning space, Clorox has seen success in other sectors with brands like Kingsford, Brita, and Hidden Valley.
Like all other consumer staples stocks on this list, Clorox is known for delivering strong growth in revenue and year-over-year earnings. The company has also consistently paid decent dividends, with a current dividend yield of over 2%. All of these factors have led to long-running, relatively consistent growth over the years.
So far in 2020, Clorox has done something consumer staples stocks don’t generally do: it has seen tremendous gains, climbing from just over $150 per share in January to around $210 per share by late-September.
The growth is directly attributed to the COVID-19 pandemic. As the coronavirus continues to change the way we live, consumers, businesses, and municipalities are looking for ways to reduce the chance of transmission of the virus. Scientists say that cleanliness and proper hygiene are some of the best ways to do so.
As a result, the cleaning supplies sector as a whole has seen a dramatic increase in demand. At the beginning of the pandemic, it became difficult to find Clorox products on shelves, as the company couldn’t keep up with the massive amount of cleaning products consumers were purchasing.
That supply chain problem has been solved for the most part, but the COVID-19 pandemic is far from over, and demand for Clorox products isn’t likely to slow any time soon. Moreover, there’s a valid argument that, even following the pandemic, the virus will remain so deeply ingrained in the minds of consumers that demand for cleaning and hygiene products isn’t going to slow.
As a result, Clorox stock may have plenty more room to climb ahead.
4. Procter & Gamble Co (NYSE: PG)
Procter & Gamble has been around for almost 200 years and has seen incredible success throughout the centuries. Today, the company has 22 well-known brands that each generate more than $1 billion in annual revenue, alongside a long list of lesser-known brands that helped the company generate more than $67 billion in revenue in 2019.
Some of Procter & Gamble’s most recognized brands include Tide, Crest, and Gillette. However, these massive brands only represent a small portion of the company’s lineup in paper products, laundry detergents, diapers, and beauty products.
Procter & Gamble’s share price has seen a strong recovery from severe declines caused by the initial wave of COVID-19. After all, consumers aren’t likely to stop cleaning their clothes or brushing their teeth anytime soon. Although economic fears hit hard early on, investors are expecting to see a continuance in the sales and earnings growth the company is known for.
The company is also constantly innovating. Most recently, it developed and launched a safe, naturally derived line of insect repellent products known as Zeno. It also recently launched a line of plant-based cleaning products called Home Made Simple that it expects to be met with strong demand in the face of the COVID-19 pandemic.
When it comes to dividends, the company has a history of providing a consistently strong dividend payout, with a current dividend yield of more than 2%. Moreover, the company has a history of impressive dividend growth.
As Procter & Gamble continues to innovate, drive compelling sales, and show appreciation to its investors through aggressive dividend payments, the stock becomes harder and harder to ignore.
5. Walmart (NYSE: WMT)
Walmart may be the last consumer staples stock on the list, but it is far from the least impressive. When you read the name, you might have questioned it’s fit for the consumer staples category — after all, isn’t Walmart in the retail game?
You’re right, Walmart is one of the world’s most successful retailers. Then again, companies that see tremendous success in one area often branch out to use their strengths in others, and Walmart has dug deep into several different sectors. One of the biggest of these is consumer staples products, which it sells exclusively in Walmart and Sam’s Club stores.
These products are labeled with the Great Value brand and offer low-cost alternatives to some of the most popular consumer staples products on the market across various categories. The company manufactures everything from paper towels to cleaning supplies, paper plates, and utensils to food products like cereals and microwave dinners. The company also markets the Equate brand, offering up a long list of medications and other health care and hygiene products.
Going a step further, an investment in Walmart doesn’t just give you access to their strong portfolio of products, it provides exposure to one of the world’s most successful retailers, both online and in the brick-and-mortar sense.
Walmart was another stock that has done overwhelmingly well, even throughout the coronavirus pandemic and as the election season started to roll in. After all, no matter who our next president is or what sickness is rolling around, people have to have a place to get food, medical supplies, and other essential products.
On top of that, Walmart was one of few stores that stayed open throughout the pandemic, offering both essential items like food and medicine and nonessential items like swimming pools and skateboards. This proved to make a huge difference as bored consumers looked for activities to keep their minds busy while they were forced to stay home.
Although Walmart’s dividend yield is relatively low compared to other consumer staples stocks, sitting at 1.58%, the strong historic price appreciation seen in the stock outweighs the light dividends.
All in all, Walmart is a household name and the go-to store for just about anything for many. As a result, the company has delivered consistently impressive performance through good economic times and bad. All in all, Walmart is a relatively safe bet that is known for producing strong gains. What more could you ask for in an investment?
Pro tip: If you’re going to add consumer staples stocks to your portfolio, make sure you choose the best possible companies. Stock screeners can help you narrow down the choices to companies that meet your requirements. Learn more about our favorite stock screeners.
Although consumer staples stocks are far from a viable way to get rich quickly, Warren Buffett will tell you they’re a great way to get rich over time. Thanks to their position as producers of staple products ingrained in the consumer’s lifestyle, consumer staples companies are known for increasing revenues and earnings and relatively steady growth in the stock market.
As a result, if you’re looking for buy-and-hold opportunities, consumer staples stocks should make up a large part of your portfolio. It’s important to remember that although this list contains some of the top staple stocks in my opinion, it’s still based on my personal opinion. There are always risks in investing, and investors should always do their own due diligence or speak to a professional investment advisor before making investment decisions.
Do you invest in consumer staples stocks? What are your favorite names in the consumer staples sector?
Disclosure: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers Team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.