The company is the largest producer of soap in the world, but it also makes countless other goods, including Lipton teas and Ben & Jerry’s ice creams. Unilever stands out for its poor environmental record, though it has recently announced plans to drastically reduce its footprint before the end of the decade. It has also proved its worth to dividend investors many times over, given the 61 consecutive years of annual payout increases it has put up. You simply don’t achieve a dividend record like that without doing something right, and consistently so. A retail employee stocking shelves with consumer packaged goods/manufacturing products.
- For investors who prefer to take a contrarian approach, Unilever is working on a business turnaround.
- These goods are those products that people are unable—or unwilling—to cut out of their budgets regardless of their financial situation.
- Investing in various consumer staple companies can diversify your portfolio and potentially reduce risk.
- While this sector might appeal to investors due to consistent demand, evolving consumer preferences are key in determining which companies will thrive and which are not viable for long-term holds.
- More recently, that spending has shifted back to discretionary categories, weighing on some consumer staples stocks such as Clorox (CLX -0.33%), which had earlier benefited from the demand for cleaning products.
Fixed income yields are so low in nominal terms and mostly negative in real terms that they want to be in equity markets but in a safer way. They aren’t true consumer staples but they aren’t decimated like things such as gaming, lodging, and leisure. The biggest risk is generally not the cash flows declining over time – central banks will always target an inflation rate of at least zero to avoid deflation – but rather the interest rates going up. Consumer staples are a good way to own cash flows that correlate well with this level of spending in the real economy. For most stocks, this is a positive over the long run, but stocks move around a lot in price, which makes them risky.
How to invest in consumer staples
Most consumer staples stocks tend to be larger conglomerates that are better diversified. Consumer staples stocks are often valued for their consistent dividend payments, making them appealing to income-seeking investors. Many companies in this sector have a history of distributing dividends, providing a reliable income stream in addition to potential capital appreciation.
Their longevity is a reflection of their brand value, a history of acquiring smaller brands, and their ability to endure a wide range of challenges and economic cycles. When investing in consumer staples stocks, it’s vital to consider the tax implications and adopt tax-efficient strategies to optimize returns and minimize tax liabilities. Two primary tax considerations for these investments are capital gains taxes and dividend taxes.
Mondelez International makes and sells snacks and beverages to supermarkets, gas stations, drug stores, club stores and other retailers in the U.S. and abroad. Brand names include Oreo, Clif Bar, Tate’s Bake Shop, Ritz and Toblerone. Coca-Cola has size, market share and a leading operating margin on its side.
Personal product companies
The company also owns Frito-Lay and Quaker, as well as popular drink brands such as Mountain Dew and Gatorade. Its Frito-Lay snack business generates almost as much revenue in North America as its beverages, and that business has been a source of growth while soda sales slow in the U.S. and around the world. With its global brands and distribution, Pepsi enjoys many of the same advantages as industry giants P&G and beverage company competitor Coca-Cola (KO -0.68%). With that said, consumer staples will not outperform the overall stock market. Staples like food, basic medicines, and personal care products are a lot less. So the general goal of those in the markets during periods of higher inflation and higher-than-normal nominal GDP is to try to lock in cash flows that approximate the level of growth in the real economy.
Long-duration equities like low-/no-earning tech which perform well in the early cycle start to give way to lower-duration (lower earnings multiples) stocks like consumer staples. Other stocks in consumer staple industries include consumer food manufacturers (e.g., General Mills), consumer tobacco manufacturers (e.g., Phillip Morris International), and consumer beverage (e.g., PepsiCo). This level of stability makes consumer staples well suited to longer-term trading and investing strategies. Whether we’re in a recession or a boom market, we’ll always need products like shampoo and toilet paper. As such, the companies that make these items are said to maintain reliable, steady growth regardless of the economy.
Product Name
But for someone in the financial markets receiving that stream of income, it’s just cash flow. Consumer staples stocks often pay dividends, which are taxed as ordinary income. The rate of dividend taxation is determined by your income tax bracket, with rates spanning from 0% to 20%. It’s not just the rock solid sales and earnings that show consistency year in and year out thanks to the recession-proof nature of junk food sales. Discount retailer Dollar General (DG, $227.82) is a nationwide chain that offers everything from cleaning products to packaged food to over-the-counter medicines to holiday items.
Best Consumer staples ETFs
Consumer staples are considered to be non-cyclical, meaning that they are always in demand, year-round, no matter how well the economy is—or is not—performing. Also, people tend to demand consumer staples at a relatively constant level, regardless of their price. The Consumer Staples sector consists of companies that provide goods and services that people use on a daily basis, like food, clothing, or other personal products. No matter if you decide to invest in a consumer staples index ETF or mutual fund, it’s a good idea to answer any lingering questions you may have. The following are some of the most common questions that investors have about consumer staples funds.
You’ll learn the key behaviors of this segment and how they translate into investment goals. You’ll also meet 10 consumer staples stocks that are poised to thrive next year and beyond. The cosmetics subsector tends to be more volatile than other parts of the consumer staples industry. That’s because trends in the beauty business, which are subject to broader fashion tastes, tend to change more quickly and attract smaller brands. So you still want to be diversified across a number of stocks within the consumer staples sector and other types of stocks as well.
Celsius Holdings (CELH, $94.84) might not be the most well-known consumer staples stock on this list, but it is worth a mention because it has an impressive track record of growth in recent years. For those unfamiliar, Celsius sells energy drinks and “liquid supplements” under the Celsius name. Its edgy flavors include apple jack’d, inferno punch, and strawberry dragon fruit. Among the hardest-hit segments was packaged foods and meats, a competitive industry due to the presence of lower-priced private-label alternatives. As input costs eased, brand-name food companies stepped up discounts and advertising spending to attempt to gain market share.
MarketBeat’s stock profiles can be an excellent place to start exploring financials. One unknown—for both 2024 and the longer term—may be the impact of the new weight-loss drugs. How many people will take these drugs and what their effect on sales will be is not yet known. Packaged foods and soda companies may be the most at risk, whereas household products companies and retailers may be less exposed. When buying individual stocks, it’s imperative to do due diligence and research the consumer discretionary stocks you’re interested in. Individual stock picking can be a very risky way of investing, and that means you should pursue this strategy with your eyes wide open.
Please appreciate that there may be other options available to you than the products, providers or services covered by our service. The company started as a condensed milk company, and milk chocolate was one of its first products. Today, the firm has expanded to produce a gigantic range of different foods and beverages. Most of that amount will be new construction, https://bigbostrade.com/ and new stores will be Supercenters or smaller Neighborhood Markets. While that is twice what you would get from an S&P 500 index fund, it is only about middle of the road for Coca-Cola over the past decade or so. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Your purchase must be returned in salable condition with the original packaging,including Universal Product Code (UPC), manuals, parts and your receipt or packaging slip. Kimberly Ellis is a personal finance writer at Finder, specializing in banking and financial literacy. After teaching in public and bollinger bands strategy private schools, Kimberly zeroed in on personal financial education to help families and kids develop lifelong money skills. She hails from New York City, graduating summa cum laude from Queens College with a BA in elementary education and mathematics, as well as a New York State teaching certificate.
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