Consumer staples are items viewed as essential by people in their everyday lives. They include products such as food, beverages, household cleaners, and hygiene products such as soap and deodorant. Essentially, consumer staples are the items people are likely to continue buying in any type of economy.
This makes consumer staple stocks good to own, especially in the event of a recession or economic downturn. While people may delay spending on non-essential or discretionary items when times get tough, everybody still needs to eat and bathe. The critically important nature of their products helps to explain why many consumer staple stocks are among the best-performing securities of the last 10 years. They can help keep a portfolio buoyant even in the event of an economic or market decline.
With many analysts still predicting a recession in 2024, consumer staple stocks could be a wise choice at this point. More immediately, if you think there’s likely to be a September rally, consider adding these three consumer staple stocks before liftoff.
Costco (COST)
Big box retailer Costco (NASDAQ:COST) continues to be a reliable investment. Year-to-date, the stock is up a healthy 20%, bringing its five-year increase to 126%. The company remains a favorite of consumers who gladly pay an annual membership fee of as much as $120 to purchase its large portioned products, which are sold at cost to the company. Costco also sells competitively priced gasoline, wine, and consumer staples such as running shoes and some over-the-counter medications .
The business model helped to successfully carry Costco through the pandemic and remains strong today. The company recently reported that its same-store sales rebounded in July of this year, rising 2.5% compared with a year earlier, after declining in May and June. Costco said the July increase was driven by strengthening food sales. The company announced earlier this year plans to crackdown on people who share membership cards to access its warehouse clubs, a move that should bolster Costco’s finances moving forward.
Procter & Gamble (PG)
While shares of Procter & Gamble (NYSE:PG) are up nearly 90% over the last five years, the company’s stock has stagnated so far in 2023, rising only 1% since January. The company behind Tide laundry detergent and Crest toothpaste has been hurt by high prices for its name brand products. Consumers struggling with inflation and elevated prices have been searching out cheaper generic alternatives to Procter & Gamble’s products this year, which has hurt both sales and PG stock.
During recent earnings calls, the company noted that decreases in its sales have coincided with an average price increase on its consumer staple products of 10% year-over-year. However, the company has continued to rack up prices on name brand items, that also include Gillette razor blades and Bounty paper towels. Price increases led to Procter & Gamble reporting financial results recently that beat Wall Street forecasts across the board, giving PG stock a boost in the process.
Should the U.S. economy skirt a recession this year, it will no doubt be good news for Procter & Gamble and its shareholders.
General Mills (GIS)
General Mills (NYSE:GIS), the food company best known for making cereal staples such as Cheerios and Chex, recently raised its quarterly dividend payout to stockholders by 9%. Going forward, the company will pay 59 cents a share each quarter, giving GIS stock a strong 3.55% yield. Add in the fact that General Mills’ stock currently trades at just 15 times forward earnings, and this becomes an attractive option for investors, especially those interested in income and who plan to hold stocks for long periods of time.
GIS stock has been an under-performer this year, having declined 20% since January. Through five years, the share price is up 40%. The slide lower this year has been prompted by softening sales and disappointing quarterly earnings. At the end of June, the company announced that its quarterly sales missed Wall Street targets, sending the stock lower as a result. However, the company makes and sells more than 100 branded products ranging from yogurt to dog food. And it is moving more into snack bars and away from traditional cereal.
Given the current valuation and dividend, GIS stock should be seen as a buy-the-dip opportunity.
