Seven Consumer Staples Investments to Purchase Amid Inflation, Recession Risk

Seven consumer staples investments to purchase for dividends amid inflation, recession risk and Russia’s refusal to end its invasion of Ukraine provide paths to protect personal portfolios against peril.

The seven consumer staples investments to purchase offer products and services people use frequently as essential items. Food, clothing and shelter are basic human needs and companies that provide them have customers who may cut back on buying such items but not eliminate them.

In contrast, the consumer discretionary sector manufactures and markets luxury goods that consumers might want to buy but can pass up when economic uncertainties require caution. Consumer staples, of which food and beverage are a subset, usually outperform stock indexes during recessions and bear markets.

Chart generated using Stock Rover. Start your 2-week free trial now.

Pension Fund Chairman Picks Two of Seven Consumer Staples Investments to Purchase

Consumer staples companies tend to have reliable cash flows and can increase prices in response to inflation. Instead, consumers will reduce spending on non-essential products and services when money becomes tight, said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter.

For a broader portfolio that focuses on consumer staples in general, there are several good exchange-traded funds (ETFs) that deliver both solid returns and attractive yields. The most volatile of the group, and the one with the highest recent returns, is iShares U.S. Consumer Staples (IYK). Bargain hunters may like the fund’s recent pullback to offer a reduced buy price.

Chart courtesy of www.stockcharts.com

The dividend-paying fund holds 52 stocks and 65% of the fund is in the 10 largest holdings. Top positions include Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), PepsiCo. (NASDAQ: PEP). The fund also offers a Securities and Exchange Commission (SEC) yield of 1.42%.

Bob Carlson, head of the Retirement Watch newsletter, meets with Paul Dykewicz.

For a diversified, dividend-paying position in food and beverage stocks, investors may want to consider an exchange-traded fund (ETF) such as Invesco Dynamic Food and Beverage (PBJ), suggested Carlson, who monitors that sector closely. The fund tends to have smaller and more growth-oriented companies than others in the consumer staples sector.

The ETF has 29 stocks, and 47% of the fund is in the 10 largest positions. Top holdings recently were General Mills (NYSE: GIS), Keurig Dr. Pepper (NASDAQ: KDP), Sysco (NYSE: SYY), Hershey (NYSE: HSY) and PepsiCo.

Chart courtesy of www.stockcharts.com

Walmart Ranks as One of the Seven Consumer Staples Investments to Purchase

Jim Woods recommends consumer staples stocks in his Intelligence Report newsletter. One of them is dividend-paying Walmart (NYSE: WMT), of Bentonville, Arkansas, the largest U.S. retailer. The stock is a core holding in the Income Multipliers portfolio of his Intelligence Report newsletter.

Walmart reported excess inventory earlier in the year that led to lower-than-expected earnings, but the country’s largest and one of its most important retailers is rebounding, Woods wrote to his subscribers in his latest newsletter. The company reported that it has made significant progress on reducing discretionary inventory and focusing more on “necessity” spending, such as food and toiletries, among other such products, Woods continued.

Chart courtesy of www.stockcharts.com

“Doing so helped ameliorate otherwise worse results,” Woods wrote. “So, while in the aggregate the latest retail earnings were better than feared, we still can’t rule out that the longer inflation stays in place, and as jobless claims slowly rise, consumer spending won’t be further pressured.”

Paul Dykewicz meets with stock picker Jim Woods, who heads the Intelligence Report newsletter, as well as co-leads Fast Money Alert.

Procter & Gamble Rates Among Seven Consumer Staples Investments to Purchase

Another Intelligence Report Income Multipliers portfolio position is Procter & Gamble, a Cincinnati, Ohio-based diversified consumer product company. Procter & Gamble offers a strong cash flow that allows it to provide a dividend yield of 2.6%.

In addition, Procter & Gamble has a rising dividend policy. In fact, the company has raised its dividend annually for the past 66 years.

Potential risks to the company include inflation weighing on its profit margins, weakened sales from emerging markets in China and the effects of a strong U.S. dollar, said Michelle Connell, who heads Dallas-based Portia Capital Management.

Another risk is that consumers may use private label and generic products more than those of Procter & Gamble, Connell continued. Even though the stock is down so far in 2022, it has a potential upside of 19% within the next 12 months, she added.

Chart courtesy of www.stockcharts.com

Chocolate Maker Sweetens Seven Consumer Staples Investments to Purchase

The Hershey Company (NYSE: HSY), of Hershey, Pennsylvania, is a Buy recommendation from BofA Global Research, due partly to its resilience in times of economic distress when people crave sweets as comfort food.

“I’m sweet on the company literally known for its ‘Kisses,’ and that is The Hershey Company,” said Jim Woods, head of the Intelligence Report newsletter. Woods, who also directs High Velocity Options and Bullseye Stock Trader, has recommended Hershey in the past in and may do so again in his fast-paced trading services when the timing is right.

Woods explained that as the leading U.S. confectionery manufacturer, Hershey controls around 46% of the domestic chocolate space with brands such as Hershey bars, Reese’s and KitKat.

Chart courtesy of www.stockcharts.com

“Last quarter, HSY saw strong earnings per share (EPS) growth of 22% year over year, and I expect the company to deliver an even tastier result when they report earnings again in late October,” Woods said. “The reason being is that confection sales are up of late, and I think it’s because many consumers are taking refuge in the small pleasures in life where they can, especially considering the dual pinch of rising inflation and soaring gas prices.”

PepsiCo Is Another of the Seven Consumer Staples Investments to Purchase

PepsiCo, a Purchase, New York-based global snack and beverage company, is among the seven consumer staples investments to purchase. Its key divisions include Frito-Lay North America (FLNA), Quaker Foods NA, North America Beverages (NAB), Latin America, Europe Sub-Saharan Africa (ESSA) and Asia, Middle East and North Africa (AMENA).

The company, featuring a 2.7% dividend yield, also operates in the United Kingdom, Mexico, India and China. Brands include Pepsi Cola, Mountain Dew, Gatorade, Tropicana, Frito-Lay, Quaker and others. BofA has a Buy rating and a $190 price target on the stock. BofA Global Research wrote a research note that its valuation reflects PepsiCo’s “balanced momentum, margin support and brand investments” are capable of delivering the high end of its long-term outlook.

Ramon Laguarta, upon taking over as PepsiCo’s chief executive officer in 2018, pivoted the company toward a growth-oriented path, BofA wrote. Reinvestment in the business and an appetite for risk remain at the core of the company’s cornerstone philosophies of this strategy, shown in PEP’s ramping digitization efforts, new category expansion and supply chain investments to fuel a stronger innovation engine, BofA added.

Chart courtesy of www.stockcharts.com

Coca-Cola Bubbles Among Seven Consumer Staples Investments to Purchase

BofA Global Research placed a Buy rating on Coca-Cola with a $70 price objective, reflecting a target price-to-earnings (P/E) multiple of 26x the investment firm’s fiscal year 2023 earnings per share (EPS) estimate. This valuation is a premium to non-alcoholic beverage peers (22.9x), justified by BofA’s view that Coca-Cola should weather current macro headwinds better than its peers, given its size and pricing model.

Atlanta-based Coca-Cola, offering a 2.8% dividend yield, also is recommended by Mark Skousen, PhD, who added it as a favorite choice in his Forecasts & Strategies investment newsletter. Skousen placed Coca-Cola in his newsletter’s dividend-oriented Flying Five portfolio and has watched it turn a profit this year even though the market overall has dropped.

Chart courtesy of www.stockcharts.com

Coca-Cola Retains Place in Skousen’s Flying Five Portfolio

Each August issue, Skousen searches for the five highest-yielding, lowest-priced stocks in the Dow Jones Industrial Average. Coca-Cola is one of four stocks that recently retained a place in that portfolio, featuring good dividend-paying, reasonably priced stocks whose shares look ripe to rise.

Mark Skousen, a descendant of Benjamin Franklin, meets with Paul Dykewicz.

Skousen also teams up with Jim Woods for their Fast Money Alert trading service that recently recommended an energy beverage stock. Both seasoned investment prognosticators scan the beverage industry for stocks that appear positioned to outperform the market in the current conditions of high inflation, supply chain challenges and Fed rate hikes aimed at slowing economic growth.

Connell is another advocate of Coca-Cola, a company that has boosted its dividend payout for the past 60 years. It currently offers a dividend yield of 2.7%. 

Warren Buffett, one of the world’s best investors, must like the stock and dividend, since it ranks as his third-biggest holding, trailing only Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC), Connell said. The stock is up by double-digit percentages this year and has the financial fundamentals to rise higher, she added. 

Michelle Connell leads Portia Capital Management.

U.S. COVID Deaths Top 1.05 Million

COVID-19 cases and deaths can affect supply and demand for consumer staples such as food and beverages, especially with sourcing ingredients globally. Investors would be wise to track trends in COVID-19 closely, especially with new lockdowns occurring in China as it adheres to its “zero” tolerance policy for cases of the virus. China’s metropolis of Shenzhen, which borders Hong Kong, was locked down last weekend, since the country takes such measures, as well as requires frequent testing and quarantines people, when infections of the virus break out in certain locales.

U.S. COVID-19 deaths rose for the sixth consecutive week by more than 3,000, jumping to 1,050,255, as of Sept. 9, according to Johns Hopkins University. Cases in the United States climbed to 95,179,894. America still faces a dismal distinction as the nation with the largest number of COVID-19 deaths and cases.

Worldwide COVID-19 deaths in the last week only rose about half as fast as the 33,000-plus the previous week, to total 6,512,552, as of Sept. 9, according to Johns Hopkins. Global COVID-19 cases climbed nearly 4 million in the past week to reach 607,843,922 on the same date.

Roughly 79.2% of the U.S. population, or 263,103,582, have received at least one dose of a COVID-19 vaccine, as of Sept. 7, the CDC reported. Fully vaccinated people total 224,367,691, or 67.6%, of the U.S. population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 109.0 million people, up 300,000 for the second consecutive week.

The seven consumer staples investments to purchase for dividends offer products and services that should remain in demand despite 8.5% inflation, according to the latest Consumer Price Index report. With rising risk of a recession after two straight 0.75% rate hikes by the Fed in June and July, as well as possibly another increase of that size in September as Russia keeps attacking Ukraine and the latter country tries to pursue a counteroffensive to reclaim its lost land, the seven consumer staples investments offer enticing opportunities for risk-averse investors.