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The consumer staples sector has been performing really well among most product categories over the past few months, on the back of improving economy. Further, lower gas prices and increasing consumer confidence are doing the trick for these stocks. Moreover, amid global market turmoil and continued volatility in the equity market, the consumer staples sector – normally defensive in nature – appears quite reliable for risk-averse investors.
Consumer Confidence Surges
Consumer confidence – a key determinant of the economy’s health – surged during the month of August, indicating that the economy is on the recovery path after portraying a dismal show during the first half of the year. Still lower gasoline prices and a strong labor market have helped increase household wealth, which eventually boosted consumer spending.
In August, consumer confidence surged to its highest level in 11 months. The consumer confidence index increased 4.4 points to 101.1, well above the expected level of 97.4.
In fact, there is enough evidence that the economic picture is likely to rebound in the third quarter, owing to improved residential construction and strong labor market conditions.
The Winning Strategy
Investing in the consumer staples stocks is safe because of their defensive nature. However, the economy has still not recovered from Brexit aftershocks, the Federal Reserve’s still pending decision over the rate hike and other global growth issues. Though experts believe the economy is reviving, but low risk investors should be very careful about their strategy.
A time-tested way to earn stable returns in the face of prevailing economic conditions is to invest in low-beta stocks that pay high dividend yields and have an attractive Zacks Rank. Before we handpick the right stocks, let us delve a little deeper into the parameters for the selection.
Our Screening Metrics
Beta, one of the most commonly-used appraisal measures of a stock’s volatility, measures the tendency of a stock's returns to respond to market swings. For example, the market as a whole has a beta of 1. Therefore, a stock with a beta of less than 1 is less volatile compared to the entire market, while a stock with a beta higher than 1 is more volatile.
Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.
The other parameter, dividend yield, assesses the amount of income received in proportion to the share price. Amid the current volatility, it could be a smart strategy to buy stocks that yield good dividends, thus ensuring a steady income.
Thus, based on a solid Zacks Rank #1 (Strong Buy) or #2 (Buy), a beta of less than 0.8, and dividend yields of more than 2%, we have zeroed in on five stocks that have bright prospects to ride out the impending volatility.
NY-based Colgate-Palmolive is a leading global consumer products company, firmly focused on Oral Care, Personal Care, Household Surface Care, Fabric Care and Pet Nutrition.
Despite macroeconomic and currency headwinds throughout 2016, Colgate expects robust organic sales growth on the back of new products across categories and geographical regions. Colgate also envisions 2016 earnings per share to witness double-digit growth (on a currency neutral basis). As of the existing spot rates, management continues to expect gross margin to expand in 2016. With a dividend yield of 2.10% and a beta value of 0.59, this stock appears to be a great buffer for your portfolio in uncertain markets.
Based in Jackson, MS, Cal-Maine Foods is the one of the largest producers and distributors of fresh shell eggs in the U.S. This Zacks Rank #2 company believes that strong performance of its specialty eggs are driving growth, given the favorable consumer demand trends. The company is making appropriate investments to expand its production capabilities for specialty eggs and enhance its product mix.
Cal-Maine has a great dividend yield of 3.84% and a beta value of 0.70.
Clorox is engaged in the production, marketing and sale of cleaning, household, food and other personal care products in the U.S. and international markets.
Clorox's diversified brand portfolio positions the company well above its peers to generate above-average industry growth and sustain itself in the currently challenging environment. With a dividend yield of 2.44% and a beta value of 0.33, this Zacks Rank #2 stock looks attractive.
The Kraft Heinz Company is a food and beverage company based in Pittsburgh, U.S.
Kraft Heinz is seeing top-line weakness over the past several quarters. Soft spending by U.S. shoppers along with rapid changes in consumer preferences and behavior are hurting the company’s categories.
Though its sales have been relatively soft, cost savings have led to better margins, mainly in the developed markets of the U.S. and Europe. This Zacks Rank #2 company has implemented many cost-saving initiatives including the integration of Kraft Foods and Heinz. Management plans to save $1.5 billion in annual costs by the end of 2017, mainly through work-force reductions, factory closures and consolidations. A portion of its savings is being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth. The company is also working for whitespace expansion of the Kraft and Heinz brands in both food services as well as international channels.
Kraft Heinz yields a dividend of 2.68% and has a beta value of 0.46.
Parsippany, NJ-based Pinnacle Foods manufactures a wide variety of prepackaged foods under multiple brand names. Its products include Duncan Hines cake mix, Mrs. Butterworth's syrup and Vlasic pickles.
The company boasts a strong brand portfolio and intends to continue investing in innovation to further differentiate its brands in the marketplace. It has also been pursuing various acquisitions over the years to enhance distribution network, customer base and boost long-term growth.
Pinnacle Foods also has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margins.
With a dividend yield of 2.25% and a beta value of 0.34, this stock appears to be a great buffer for your portfolio in uncertain markets.
An intelligent selection of stocks for investment greatly benefits investors. The abovementioned stocks can prove to be valuable additions to your portfolio.
You can also use the Zacks Stock Screener to find other stocks with this winning combination. Investors can confidently end their search at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>
Unique Zacks Analysis of Your Chosen Ticker
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5 Low Risk Consumer Staples Stocks to Buy Now
The consumer staples sector has been performing really well among most product categories over the past few months, on the back of improving economy. Further, lower gas prices and increasing consumer confidence are doing the trick for these stocks. Moreover, amid global market turmoil and continued volatility in the equity market, the consumer staples sector – normally defensive in nature – appears quite reliable for risk-averse investors.
Consumer Confidence Surges
Consumer confidence – a key determinant of the economy’s health – surged during the month of August, indicating that the economy is on the recovery path after portraying a dismal show during the first half of the year. Still lower gasoline prices and a strong labor market have helped increase household wealth, which eventually boosted consumer spending.
In August, consumer confidence surged to its highest level in 11 months. The consumer confidence index increased 4.4 points to 101.1, well above the expected level of 97.4.
In fact, there is enough evidence that the economic picture is likely to rebound in the third quarter, owing to improved residential construction and strong labor market conditions.
The Winning Strategy
Investing in the consumer staples stocks is safe because of their defensive nature. However, the economy has still not recovered from Brexit aftershocks, the Federal Reserve’s still pending decision over the rate hike and other global growth issues. Though experts believe the economy is reviving, but low risk investors should be very careful about their strategy.
A time-tested way to earn stable returns in the face of prevailing economic conditions is to invest in low-beta stocks that pay high dividend yields and have an attractive Zacks Rank. Before we handpick the right stocks, let us delve a little deeper into the parameters for the selection.
Our Screening Metrics
Beta, one of the most commonly-used appraisal measures of a stock’s volatility, measures the tendency of a stock's returns to respond to market swings. For example, the market as a whole has a beta of 1. Therefore, a stock with a beta of less than 1 is less volatile compared to the entire market, while a stock with a beta higher than 1 is more volatile.
Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.
The other parameter, dividend yield, assesses the amount of income received in proportion to the share price. Amid the current volatility, it could be a smart strategy to buy stocks that yield good dividends, thus ensuring a steady income.
Thus, based on a solid Zacks Rank #1 (Strong Buy) or #2 (Buy), a beta of less than 0.8, and dividend yields of more than 2%, we have zeroed in on five stocks that have bright prospects to ride out the impending volatility.
5 Prominent Picks to Buy Now
Colgate-Palmolive Co. (CL - Free Report)
NY-based Colgate-Palmolive is a leading global consumer products company, firmly focused on Oral Care, Personal Care, Household Surface Care, Fabric Care and Pet Nutrition.
Despite macroeconomic and currency headwinds throughout 2016, Colgate expects robust organic sales growth on the back of new products across categories and geographical regions. Colgate also envisions 2016 earnings per share to witness double-digit growth (on a currency neutral basis). As of the existing spot rates, management continues to expect gross margin to expand in 2016. With a dividend yield of 2.10% and a beta value of 0.59, this stock appears to be a great buffer for your portfolio in uncertain markets.
COLGATE PALMOLI Dividend Yield (TTM)
COLGATE PALMOLI Dividend Yield (TTM) | COLGATE PALMOLI Quote
Cal-Maine Foods, Inc. (CALM - Free Report)
Based in Jackson, MS, Cal-Maine Foods is the one of the largest producers and distributors of fresh shell eggs in the U.S. This Zacks Rank #2 company believes that strong performance of its specialty eggs are driving growth, given the favorable consumer demand trends. The company is making appropriate investments to expand its production capabilities for specialty eggs and enhance its product mix.
Cal-Maine has a great dividend yield of 3.84% and a beta value of 0.70.
CAL-MAINE FOODS Dividend Yield (TTM)
CAL-MAINE FOODS Dividend Yield (TTM) | CAL-MAINE FOODS Quote
The Clorox Company (CLX - Free Report)
Clorox is engaged in the production, marketing and sale of cleaning, household, food and other personal care products in the U.S. and international markets.
Clorox's diversified brand portfolio positions the company well above its peers to generate above-average industry growth and sustain itself in the currently challenging environment. With a dividend yield of 2.44% and a beta value of 0.33, this Zacks Rank #2 stock looks attractive.
CLOROX CO Dividend Yield (TTM)
CLOROX CO Dividend Yield (TTM) | CLOROX CO Quote
The Kraft Heinz Company (KHC - Free Report)
The Kraft Heinz Company is a food and beverage company based in Pittsburgh, U.S.
Kraft Heinz is seeing top-line weakness over the past several quarters. Soft spending by U.S. shoppers along with rapid changes in consumer preferences and behavior are hurting the company’s categories.
Though its sales have been relatively soft, cost savings have led to better margins, mainly in the developed markets of the U.S. and Europe. This Zacks Rank #2 company has implemented many cost-saving initiatives including the integration of Kraft Foods and Heinz. Management plans to save $1.5 billion in annual costs by the end of 2017, mainly through work-force reductions, factory closures and consolidations. A portion of its savings is being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth. The company is also working for whitespace expansion of the Kraft and Heinz brands in both food services as well as international channels.
Kraft Heinz yields a dividend of 2.68% and has a beta value of 0.46.
KRAFT HEINZ CO Dividend Yield (TTM)
KRAFT HEINZ CO Dividend Yield (TTM) | KRAFT HEINZ CO Quote
Pinnacle Foods, Inc.
Parsippany, NJ-based Pinnacle Foods manufactures a wide variety of prepackaged foods under multiple brand names. Its products include Duncan Hines cake mix, Mrs. Butterworth's syrup and Vlasic pickles.
The company boasts a strong brand portfolio and intends to continue investing in innovation to further differentiate its brands in the marketplace. It has also been pursuing various acquisitions over the years to enhance distribution network, customer base and boost long-term growth.
Pinnacle Foods also has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margins.
With a dividend yield of 2.25% and a beta value of 0.34, this stock appears to be a great buffer for your portfolio in uncertain markets.
PINNACLE FOODS Dividend Yield (TTM)
PINNACLE FOODS Dividend Yield (TTM) | PINNACLE FOODS Quote
Bottom Line
An intelligent selection of stocks for investment greatly benefits investors. The abovementioned stocks can prove to be valuable additions to your portfolio.
You can also use the Zacks Stock Screener to find other stocks with this winning combination. Investors can confidently end their search at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>