Consumer staples stocks can provide an important defensive aspect to protect your portfolio in times of uncertainty. The consumer staples sector is comprised of companies that produce and sell items that are considered essential for everyday use. Products include household goods, food, beverages, hygiene products and other items that consumers are unwilling or unable to eliminate from their budgets, even in times of financial trouble. As a result these companies are viewed as non-cyclical and able to maintain stable growth, regardless of twists and turns elsewhere in the market.
The top consumer staples stocks generate steady earnings and revenue numbers throughout the ups and downs of the economic cycle and may pay sizable dividends. Here are some of the best rated consumer staples stocks to buy now.
British American Tobacco (BTI)
British American Tobacco is the largest European tobacco company, with slightly less than half of its sales in the U.S. conventional tobacco will likely continue to drive the profits and the cash flow needed to support BTI’s dividend for at least the next ten years. However, tobacco companies know the long-term future hinges on electronic cigarettes and other next-generation products. British American may be the best-positioned tobacco company in emerging categories, given its Vype brand and Vuse investment.
BTI holds a consensus Buy recommendation from the analysts covering the firm along with an average price target of $50.12, which represents a more than 25% upside from here.
Kroger Co. (KR)
Kroger Co. operates supermarkets, drug stores, multi-department stores and convenience stores. The company also makes and processes some of the food it sells in its supermarkets. In 2020, Kroger introduced more than 50 new plant-based products in its Simple Truth plant-based collection. The company also launched chefbot, an AI-powered tool aimed at reducing food waste by suggesting recipes based on what customers already have in their kitchens.
Kroger stock currently trades at forward P/E ratio of 13.87, which is a discount when compared with the industry average of 14.16. Furthermore, Kroger’s 1.98% dividend payout is a sustainably low ratio of around 20% of its income after tax.
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Coca-Cola Femsa (KOF)
Coca-Cola Femsa is the largest international bottler for Coca-Cola Co. (KO). Coca-Cola Femsa’s second-quarter results were encouraging, given that a worst-case economic scenario seems to be priced in across the company’s most important markets. What’s more, the company’s massive Latin American footprint gives it flexibility to adjust its merchandising strategy and product portfolio to adapt to market conditions.
Coca-Cola Femsa is poised to benefit as Mexico’s recovery from Covid gains steam. There could be more bumps in the road, but considering that KOF stock is now going for less than 15x earnings, and that current earnings are hardly the peak of what the company could achieve in an economic upswing, KOF seems like a good bet going forward. Investors also benefit from KOF’s generous 6.95% dividend yield.
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