This year’s market downturn has been brutal, even for steadier, less speculative stocks. With little sign concerns like inflation, interest rates, and a possible recession aren’t going away anytime soon, this trend could carry on in the months ahead. However, there is a silver lining. The 2022 bear market has created great opportunities among consumer stocks to buy.
Pushed down to attractive valuations, and now sporting higher dividend yields, these stocks could provide solid long-term returns, in two ways. First, even it takes time for equities to get back into “bull market mode,” steady dividends from these names could result in a positive total return from your position.
Second, oversold due to current “doom and gloom,” a combination of continued earnings growth, plus a market rebound, could result in gradual price appreciation.
If you are a long-term investor, now’s the time to add these seven consumer stocks to buy for your portfolio, all but one of which earn an “A” rating in my Dividend Grader.
|Ethan Allen Interiors
|Hamilton Beach Brands
Consumer Stocks to Buy: Archer-Daniels-Midland (ADM)
It may seem odd to consider Archer-Daniels-Midland (NYSE:ADM) a “hard-hit” stock. Yet, while shares in this agribusiness giant are up 18.5% year-to-date, they have pulled back a fair amount since April.
Earlier this year, ADM stock went on a tear, following Russia’s invasion of Ukraine. The invasion caused a big jump in grain and other food commodity prices. During the quarter ending June 30, ADM’s earnings per share (or EPS) came in at $2.18, up 73% from the prior year’s quarter.
Recession concerns recently have weighed on ADM. However, this may be a market overreaction. Shares today trade for 13.1 times 2023 estimated earnings, a low forward multiple. ADM stock, earning an A in Dividend Grader, has a forward dividend yield of 1.8%, with a nearly 30 year track record of dividend growth.
In recent months, Costco (NASDAQ:COST) shares have been hit by a double-whammy. First, rising interest rates have put pressure on growth stocks valuations. Second, a sharp drop in consumer sentiment has led to the market shunning retail stocks.
As a result, COST stock has fallen by around 17% this year. However, far from a warning sign, this sell-off gives you the opportunity to load up on a long-term winner while it finds itself out of favor among investors. As I’ve argued previously, this retail discount club operator is considerably more inflation and recession-resistant than its peers.
Costco has historically been resilient during challenging economic times. This leaves shares well-positioned for a gradual comeback. COST typically isn’t viewed as a dividend stock, but earning a B rating in Dividend Grader, its modest payout (0.75% forward yield) has grown by an average of 12.8% over the past five years.
Ethan Allen Interiors (ETD)
Shares in Ethan Allen Interiors (NYSE:ETD) have fallen to rock-bottom prices. Anticipating a severe reversal in operating results, after the tailwinds resulting from the pandemic recovery, the market has pushed this manufacturer and retailer of home furnishes to a heavily discounted valuation making it one of the long-term consumer stocks to buy.
Currently, ETD stock sells for just 7 times estimated earnings. Since the late 2000s, Ethan Allen has only briefly traded at such low multiples, typically trading for between 10 and 20 times earnings. With the potential to gradually rise to its historic valuation, ETD is also a great dividend stock opportunity.
Earning an A rating in Dividend Grader, Ethan Allen shares currently offer a nearly 6% forward yield. Over the past five years, ETD’s dividend has gone up by an average of 10.5% per year. With a payout ratio of just 29.26%, there’s ample room for a further increase.
Hamilton Beach Brands (HBB)
Hamilton Beach Brands (NYSE:HBB) is another familiar consumer name, now trading at a deep value price.
Pessimism about near-term consumer spending has led the market to value shares in the home appliance maker at just 5.4 times estimated 2022 earnings.
With the sell-side anticipating only a modest drop in EPS (from $2.10 to $1.75), investors could in time realize it was a mistake to send this stock down to the low-teens per share. Even if Hamilton Beach reports anemic growth from here, a valuation much higher than today’s multiple would be justified.
Besides offering great value, HBB stock is a great opportunity for yield as well. Earning an A in Dividend Grader, the stock currently has a forward dividend yield of 3.69%. Hiking its quarterly dividend from 10 cents to 10.5 cents earlier this year, the coming years could bring additional modest payout increases.
Mondelez International (MDLZ)
Mondelez International (NASDAQ:MDLZ) is a giant in the snack foods industry. Its portfolio of brands includes Cadbury, Oreo and Toblerone. Like other food stocks, shares have been hit hard by worries about the impact of inflationary pressure on its margins.
Yet while inflation has put pressure on Mondelez’s performance, one analyst (Cowen’s Brian Holland) believes it’s been overdone. Furthermore, Holland argues the current valuation of MDLZ stock fails to reflect the company’s sales growth potential, as well as the potential for Mondelez to continue adding faster-growing brands to its portfolio, jettisoning the slower-growing ones.
Trading for just 19.5 times earnings, there’s likely potential for multiple expansion if the market starts to agree with Holland’s arguments. In terms of its dividend, MDLZ stock earns an A in Dividend Grader. MDLZ stock has a 2.72% forward yield, and a 5-year track record of double-digit dividend growth.
Benefiting from both pandemic and post-pandemic trends, weight-loss company Medifast (NYSE:MED) has experienced a big increase in sales and profitability since 2020. This led to a big increase in the price of its shares.
Over the past year and a half, however, the stock’s performance has reversed course in a big way. After sliding in price for around a year management slashed guidance as a result of the company’s growth deceleration. Shares plunged on the news.
Yet while the boom times may be over for now with Medifast’s business, there may be considerable upside for investors buying MED stock today.
Shares trade for only 12 times estimated earnings, estimates that already account for the change in outlook. MED stock’s big drop has also made shares (earning an A in Dividend Grader) high-yielding. MED currently pays out $6.56 per share in dividends annually (6% forward yield).
Trends in 2021, including supply chain disruptions and the housing boom, were very favorable to Whirlpool (NYSE:WHR).
This year, however, the trends are clearly not in its favor. The appliance maker’s shares have been slammed, as inflation puts pressure on its margins, and rising interest rates/the economic slowdown curb demand.
Still, while the company is feeling the squeeze, these headwinds may already be reflected in the price of WHR stock. Shares trade for only 6.2 times earnings estimates, providing plenty of buffer room if results fall far short of expectations. Whirlpool, earning an A in Dividend Grader, also remains a strong dividend stock.
WHR stock has a forward yield of 5.09%. The company has raised its dividend eleven years in a row, with the dividend increases averaging 9.63% over the past five years. Whirlpool’s payout ratio (26.14%) leaves plenty more room for dividend growth.
On the date of publication, Louis Navellier had a long position in ADM, COST and MDLZ. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.