If you want to follow in the footsteps of Wall Street investment moguls like Warren Buffett , a key place to look to invest your money is consumer staples . In fact, according to The Motley Fool , about 12.13% of the billionaire’s holdings are in consumer staples stocks . That includes household names like Coca-Cola, Kraft Heinz and Procter & Gamble, according to the U.S. News & World Report .
Buffett sees minimal volatility and well-documented returns make consumer staples hard to ignore. In addition to minimal volatility, consumer staples tend to be high-dividend stocks, which already have high dividend yields and produce decent pay growth. If you’re curious to see for yourself, consider these stocks from top consumer staples.
7 of the best consumer staples stocks to buy in 2021
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 possibly 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 aware of what they are putting into their bodies when they eat and drink. This has raised some concerns for Coca-Cola because the company’s flagship product is a high-sugar soft drink.
Nonetheless, the company’s stock has seen steady growth, along with higher revenues, earnings, and dividends. After all, the company has 43.7% of the non-alcoholic beverage 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 past 59 years, according to Dividend.com, and that trend is likely not 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 of consumer staples. Although the company’s flagship product, Coca-Cola, is the most successful soft drink of all time, it is 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 over $ 30 billion in revenue annually and seeing steady growth in earnings per share, the stock is a strong investment bet.
- Earnings : For the past four consecutive quarters, the company beat analyst expectations in terms of earnings per share, according to Nasdaq .
- Dividend History : According to YCharts , the shares of Coca-Cola offer an impressive dividend yield of 3.08%. The company has increased its dividend payments steadily, even through economic difficulties and the COVID-19 pandemic. Over the past five years, the stock’s return has seen a low of 2.66%, a high of 4.29% and averaged around 4.29%.
- Market Capitalization : With a market capitalization of more than $ 232 billion, Coca-Cola is one of the largest companies in the US.
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2. General Mills (NYSE: GIS)
General Mills has become a household name as a manufacturer behind popular cereals like Cheerios, Lucky Charms, and Chex . However, the company is not a one-trick pony. The company produces everything from yogurt to whole meals found in the freezer section of your local grocery store.
Over the years, like most of the big names in the consumer staples industry, General Mills has a long history of producing organic sales growth, which has resulted in increased revenue, earnings and stock prices on a relatively constant basis.
The company is also not ashamed to show its investors that it appreciates them. General Mills is known for returning value to its shareholders through share buybacks and consistently strong dividend payments. In fact, the current dividend yield on the stock is 3.44%, paying about $ 2 per year to shareholders for every share they owned during the past year.
The goliath of consumer staples has also proven its resilience to harsh market conditions during the course of the coronavirus pandemic . Although many stocks in the market took a major hit in early 2020, and again before the election, General Mills is not one of those stocks. Even in one of the most difficult economic and social times in the United States, the stock has seen growth of more than 20% since March 2020, and will likely continue more of the same for the remainder of 2021.
With a strong history of incredible market performance, competitive dividend payments, and growth in both revenue and earnings, General Mills has become a top choice among investors looking for a place in their portfolios and is worth considering. for yours.
- Earnings : The company beat analyst expectations in terms of earnings per share in three of the last four quarters, according to Nasdaq .
- Dividend History : Over the past four years, dividend yields on stocks have ranged from 3.37% to 5.03%, averaging an impressive 3.90% yield.
- Market Cap : General Mills is currently valued at over $ 35.9 billion, making it another massive company.
3. Clorox (NYSE: CLX)
Clorox is one of the largest cleaning supply companies in the world. Chances are, you have one or more of your products under your kitchen sink right now.
Founded in 1913, the Clorox brand has become synonymous with bleach and cleaning products. It is the company behind Clorox Bleach, Tilex , Pine-Sol, SOS, Green Works, and a long list of other cleaning products.
The company also has a relatively diverse product portfolio. Although most of these products are found in the cleaning industry, Clorox has had success in other industries with brands such as Kingsford, Brita and Hidden Valley.
Like all the other consumer staples stocks on this list, Clorox is known for generating strong revenue and earnings growth year-over-year. The company has also consistently paid decent dividends, with a current yield of more than 2.47%. All of these factors have led to relatively steady and lasting growth over the years.
In 2020, Clorox experienced a dramatic increase in value as a result of COVID-19. After rebounding in early 2021, the stock entered a downtrend as investors began to turn a profit. However, the stock sell-off is largely overstated, creating an opportunity for future earnings at a discount.
While vaccines are beginning to reach consumers and the COVID-19 case count is declining, consumers place more emphasis on cleaning than before the pandemic, and will likely continue to do so.
As a result, the cleaning supplies sector as a whole is expected to see continued growth in demand. At the beginning of the pandemic, it became difficult to find Clorox products on the shelves, as the company could not keep up with the massive amount of cleaning products that consumers were buying.
That supply chain problem has been solved for the most part and the demand for cleaning products is not likely to decrease anytime soon. Furthermore, there is a valid argument that, even after the pandemic, the virus will remain so deeply ingrained in the minds of consumers that the demand for cleaning and hygiene products will not diminish.
As a result, Clorox shares may have much more room to move forward.
- Earnings : Like most other stocks on this list, Clorox has exceeded analyst expectations in terms of earnings per share for the past four consecutive quarters. However, the company isn’t just known for exceeding expectations, it crushes them. Over the past four years, the company has produced a surprise average positive earnings of 21.33%.
- Dividend History : Clorox is also known for maintaining a relatively stable dividend. Over the past four years, returns have ranged from 2.4% to 2.7%, averaging 2.4% over the period.
- Market Capitalization : The stock is trading with a market capitalization of nearly $ 23 billion.
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4. Procter & Gamble Co (NYSE: PG)
Procter & Gamble has been around for almost 200 years and has been incredibly successful throughout the centuries. Today, the company has 22 well-known brands that each generate more than $ 1 billion in annual revenue, along with a long list of lesser-known brands that helped the company generate nearly $ 71 billion in revenue in 2020.
Some of the company’s most recognized brands include Tide, Crest, and Gillette. However, these massive brands only represent a small part of the company’s product line in paper products, laundry detergents, diapers, and beauty products.
Procter & Gamble’s stock price has seen a strong recovery from the severe declines caused by the initial wave of COVID-19. After all, consumers are unlikely to stop washing clothes or brushing their teeth any time soon. Although economic fears hit hard early on, investors expect to see a continuation in the sales and earnings growth that the company is known for.
In early 2021, investors began to profit from the shares. This caused prices to fall by almost 10%. Nonetheless, the move turned out to be short-term and the stock has almost rallied, although there is still a compelling argument that the stock is significantly undervalued.
The company is also constantly innovating. Most recently, he developed and launched a safe line of naturally derived insect repellent products known as Zeno . It also recently launched a line of plant-based cleaning products called Home Made Simple that it hopes to meet strong demand as strong consumer demand for cleaning products meets a widespread move to go green.
When it comes to dividends, the company has a history of providing a consistently strong dividend payment, with a current yield of more than 2.5%. Additionally, the company has an impressive dividend growth record.
As Procter & Gamble continues to innovate, drive attractive sales, and show appreciation to its investors through aggressive dividend payments, stocks are becoming increasingly difficult to ignore.
- Earnings : The company has produced compelling earnings for the past four consecutive quarters, beating analyst expectations every quarter. The surprise average earnings for the last four quarters has been 10.48%.
- Dividend History : According to YCharts , Procter & Gamble has maintained an average dividend yield of 2.84% for the last five years.
- Market Capitalization : Procter & Gamble currently trades with a market capitalization of more than $ 335 billion, representing another of the largest companies in the US.
5. Walmart (NYSE: WMT)
The following is a name that you probably know well as one of the largest retailers in the world: Walmart . When you read the name, you may have questioned its position in the consumer staples category; after all, isn’t Walmart in the retail game?
You are right, the company is one of the most successful retailers in the world. On the other hand, companies that see great success in one area often branch out to use their strengths in others, and Walmart has delved into several different sectors. One of the most important are consumer staples, which is sold exclusively in the stores Walmart and Sam’s Club.
These products are labeled with the Great Value brand and offer low-cost alternatives to some of the most popular consumer staples on the market in various categories. The company manufactures everything from paper towels to cleaning products, paper plates and utensils to food products like cereals and microwave dinners. The company also markets the Equate brand, offering a long list of drugs and other health care and hygiene products.
Going one step further, an investment in Walmart not only gives you access to its strong portfolio of products, it provides exposure to one of the most successful retailers in the world, both in e-commerce and in the traditional sense.
Walmart was another action that has done very well, even during the coronavirus crisis . Walmart was one of the few stores that remained open during the pandemic, offering both essential items like food and medicine and non-essential items like swimming pools and skateboards. This proved to make a big difference, as bored consumers sought activities to keep their minds occupied while being forced to stay home.
Although the dividend yield Walmart is relatively low compared to other consumer staples stocks, which stands at 1.57%, the strong historical price appreciation of the shares exceeds dividends light.
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 performed consistently and impressively through good economic times and bad. All in all, the stock is a relatively safe bet that is known to produce strong returns. What more could you ask for in an investment?
- Earnings : The company has a relatively consistent track record of exceeding analyst expectations in terms of earnings per share, having done so in three of the last four quarters. The average earnings surprise for the last four quarters has been 9.95%, which is even more impressive when you consider a setback that led to a negative earnings surprise of 7.95% in a quarter included in this average.
- Dividend History : Over the past four years, the dividend yields of the shares of Walmart ranged between 1.59% and 2.23%, with an average over the last five years of 2.12%.
- Market Capitalization : Walmart is trading with a market capitalization of nearly $ 394 billion.
6. Altria Group (NYSE: MO)
Altria Group is a taboo consumer staples company, but with incredible historical growth and a strong start to the year that says this growth will continue, it’s worth considering. The company is one of the largest tobacco companies in the world, taking investing in consumer staples to the next level.
After all, investing in consumer staples is about investing in products that consumers will buy regardless of economic conditions. Tobacco users are addicted to tobacco products, which means that when they stop using these products, withdrawal occurs. As a result, Altria Group has largely captured its audience.
However, that is not the only reason to buy stocks. Over the past two years, the company has watched the vaping industry take market share from the cigarette, cigar and chew markets. As is the case when any large company sees new options taking market share, Altria Group launched its own vape product , known as Juul , which has grown rapidly to become a leading option among vape users .
The company also sees incredible opportunities in the cannabis market, as experts suggest that federal legalization of cannabis for adult use is likely to take place in the United States relatively soon. In fact, the company paid $ 1.8 billion to buy a 45% stake in one of Canada’s largest cannabis companies, known as the Cronos group .
If the federal legalization of cannabis for adults takes place in the United States, the company is ready to go to market, probably taking a leadership position from the start.
To offer an even better opportunity, investors have recently started to profit from stocks, causing stock prices to drop more than 10%. While this may be a worrying move for many, the declines are likely to represent nothing more than an opportunity for future profit at a discount.
In all, if you are a social impact investor, Altria Group may not be the best option, but if your main focus is long-term growth prospects, the action is hard to ignore.
- Earnings : The company has a strong track record of exceeding earnings expectations. In the past four quarters, the company outperformed analysts three times with an average positive earnings surprise of 6.23%. In the first quarter in which the company did not meet expectations, the surprise negative earnings was 1.98%.
- Dividend History : Altria Group comes with an incredibly high dividend yield, recording 7.35%, making it a great option for investors looking to generate income through their portfolios. In the last five years, returns have ranged between 3.07% and 10.45%, with an average of 5.66%.
- Market Capitalization : Stocks are trading with a market capitalization of more than $ 87 billion.
7. Costco Wholesale Corporation (NASDAQ: COST)
Costco is one of the largest wholesale clubs in the United States, with more than 780 locations throughout the United States. The company’s claim to fame is the deep discounts offered to members for purchasing food, clothing, books, household items, and various other products in quantities greater than those found at other outlets.
While equity dividends are relatively low at around 0.83%, investors have enjoyed compelling dividend growth of late, with average annual dividend growth over the past five years standing at the 12%.
There is a strong argument that buying in bulk for savings will increase demand among consumers as the world recovers from the COVID-19 pandemic. As you can see when you go to the pump or buy a gallon of milk, prices are starting to rise in the United States.
Unfortunately, for many, that is a real problem, as they have not yet recovered from the pandemic. As a result, many suggest that consumers will look for ways to save, and that shopping at stores like Costco is one of the best ways to save money on everyday necessities.
In all, the company has a long history of strong performance and there is no expectation that we will see a change in this trend. Also, with the likelihood of consumers looking for ways to save money, the demand for Costco memberships, and therefore their sales, is expected to increase. As a result, the action should be on your watchlist .
- Earnings : Costco has a relatively strong historical performance in terms of earnings. Over the past four quarters, the company has beaten earnings expectations three times with a surprise positive average earnings of 14.05%. In the quarter, the company did not meet expectations, the negative earnings surprise was 11.57%.
- Dividend History : Over the past five years, Costco stock dividend yields have ranged from 0.68% to 1.26%, with an average yield of 0.96%, offering small but relatively consistent.
- Market Capitalization : Costco trades with a market capitalization of more than $ 180 billion.
Consider investing in consumer staples ETFs
Buying individual stocks in any sector can be a daunting task. After all, the most successful investments are born out of research , and maintaining a well-diversified portfolio of individual stocks will take a lot of time and effort.
For many investors, exchange-traded funds (ETFs) are often the best route.
If you don’t have the time, or are simply not confident in your ability to research stocks, you can be sure that most ETFs focused on consumer staples are well-diversified portfolios that give you the ability to invest in the sector as a whole. without having to evaluate each and every one of the individual actions you have.
As with individual stocks, not all ETFs are the same. Be sure to analyze historical performance, asset allocation and rates of expenses of any ETF you are considering before you dive.
Although consumer staples stocks are far from a viable way to get rich quick, Warren Buffett will tell you that they are a great way to get rich over time. Thanks to their position as producers of commodities rooted in the consumer lifestyle, consumer commodity companies are known for increasing revenues and profits and for relatively steady growth in the stock market.
As a result, if you are looking for buy and hold opportunities , consumer staples should make up a large part of your portfolio. It is important to remember that although this list contains some of the top basic actions in my opinion, it is still based on my personal opinion. There are always risks when investing , and investors should always do their own due diligence or speak with a professional investment advisor before making investment decisions.