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Pivot to a Defensive Approach With These 3 Top Stocks

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Inflation continues to be the primary headache plaguing the market, with stocks showing little signs of strength within the last few sessions. Comments from a relatively less-hawkish Jerome Powell last week provided the market with much-needed relief, but that euphoric feeling has seemingly faded.

Investors will undoubtedly be laser-focused on the upcoming FOMC meeting slated for December 13th – 14th, where the consensus is that the Fed will slow their tightening pace and implement a 50-basis-point rate hike.

Amid times of uncertainty and increased volatility, investors stand to benefit from blending in a layer of defense into their portfolios.

After all, defense wins ballgames.

Stocks in the Zacks Consumer Staples sector carry a defensive nature, as these companies’ products have an advantageous ability to generate consistent demand in the face of many economic situations.

Three top-ranked stocks from the realm – PepsiCo (PEP - Free Report) , The Hershey Company (HSY - Free Report) , and General Mills Inc. (GIS - Free Report) – could all be considerations for investors looking to heighten their portfolio’s defense.

Below is a year-to-date chart illustrating the performance of all three stocks, with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Image Source: Zacks Investment Research

As we can see, all three stocks snapped the overall bearish trend in 2022, outperforming the S&P 500 handily. Let’s take a closer look at each one.

The Hershey Company

The Hershey Company is the largest chocolate manufacturer in North America and a global leader in chocolate and non-chocolate confectionery. The company has seen its earnings outlook tick up over the last several months, helping land the stock into a favorable Zacks Rank #2 (Buy).

Hershey has been on a blazing-hot earnings streak, exceeding earnings and revenue estimates in nine consecutive quarters.

Just in its latest release, the chocolate titan penciled in a 4.8% earnings beat paired with a 4.2% sales surprise. Below is a chart illustrating Hershey’s revenue on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

Currently, the company’s annual dividend yields 1.8%, below its Zacks Consumer Staples sector average. Still, growth is apparent – the company has upped its payout five times over the last five years, translating to an 8.2% five-year annualized dividend growth rate.

Zacks Investment Research
Image Source: Zacks Investment Research

Further, HSY’s growth profile is hard to ignore, with earnings forecasted to climb 15.5% in its current fiscal year (FY22) and a further 8% in FY23.

The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 15.3% in FY22 and 6.3% in FY23.

Zacks Investment Research
Image Source: Zacks Investment Research

General Mills Inc.

General Mills is a global manufacturer and marketer of branded consumer foods sold through retail stores. The company sports a favorable Zacks Rank #2 (Buy).

For those that seek income, GIS has that covered – the company’s annual dividend currently yields a solid 2.5%, just a tick below its Zacks sector average of 2.6%. Further, the company has a sustainable payout ratio sitting at 53% of its earnings.

Zacks Investment Research
Image Source: Zacks Investment Research

Like HSY, General Mills has been on an impressive earnings streak as of late, exceeding the Zacks Consensus EPS Estimate by double-digit percentages in back-to-back quarters. In its latest release, GIS penciled in an 11% bottom-line beat paired with a modest 1% sales surprise.

Zacks Investment Research
Image Source: Zacks Investment Research

PepsiCo

PepsiCo is a long-established company engaged in the manufacturing, marketing, and distribution of grain-based snack foods, beverages, and other products.

Analysts have increased their earnings estimates over the last several months for PEP’s current and next fiscal year, helping push the stock into a Zacks Rank #2 (Buy).

Zacks Investment Research
Image Source: Zacks Investment Research

Undoubtedly a positive, PepsiCo is a Dividend King, showing an unparalleled commitment to its shareholders through 50+ consecutive years of increased dividend payouts.

The company’s annual dividend currently yields 2.5%, with a payout ratio sitting at 69% of its earnings.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

With the market experiencing volatility over the last several sessions, investors could definitely benefit from adding an additional layer of portfolio defense.

Companies in the Zacks Consumer Staples sector can provide a higher level of defense, primarily attributed to consistent demand across many economic situations.

All three stocks above – PepsiCo (PEP - Free Report) , The Hershey Company (HSY - Free Report) , and General Mills Inc. (GIS - Free Report) – could all be considered for a defensive approach.

On top of strong price action in 2022, all three stocks carry a favorable Zacks Rank paired with solid dividend payouts. Who doesn’t enjoy getting paid?


In-Depth Zacks Research for the Tickers Above


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Hershey Company The (HSY) - free report >>

General Mills, Inc. (GIS) - free report >>

PepsiCo, Inc. (PEP) - free report >>

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