An added perk is its higher dividend yield than the S&P 500 Index — even during a recession. Consumer staples stocks can be a good option for investors seeking steady growth, solid dividends, and low volatility. Buoyed by the persistent demand of their products, consumer staples companies generate crypto exchange platform trading engine white label ready consistent revenues, even in recessionary periods. As a result, consumer staples stocks decline far less during bear markets than stocks in other sectors.
A healthy demand base, and potential for improvement
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Trends that affect consumer spending power, such as higher or stagnant wages or widespread changes in the prices of essential goods, usually change the prospects for consumer discretionary companies. The consumer discretionary sector is comprised of businesses that sell non-essential goods and services. This elastic demand means that the companies that supply consumer discretionary goods can see their sales drop suddenly in response to widespread decreases in consumers’ incomes or increases in prices. Not surprisingly, their stocks’ share prices usually follow on this pattern.
Internet and Catalog Retail
Longer-term trends, such as the continued shift to online shopping and the pursuit of healthier lifestyles, can create headwinds in the sector. These are products that consumers can usually live without and don’t necessarily need in their day-to-day lives. They can cut back on them or forego them altogether without any major consequences to their well-being. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism.
Since being spun off, Philip Morris has grown its market cap to be higher than Altria’s, making it one of the biggest sin stocks in the world. PEP has owned a number of other brands, many of which it sold off in the 1990s, such as restaurant chains Pizza Hut, Taco Bell and KFC, plus the U.S. rights to Russian distiller Stolichnaya. Today, it still owns several snack and beverage brands, including Gatorade, Lay’s, Doritos, Cheetos, Mountain Dew and Quaker Foods. PG is one of the biggest employers in Cincinnati, Ohio, where it has its headquarters.
Partnerships are not a recommendation for you to invest with any one company. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Brand-name soda makers may have the ability to retain or raise prices, because they face little competition from lower-cost, generic alternatives. For example, soft drink companies Coca-Cola (), Keurig Dr Pepper (), and PepsiCo () have generally experienced strong pricing power due to a lack of competitive private-label alternatives.
Some of the companies that fall into the consumer discretionary sector include McDonald’s (MCD), Starbucks (SBUX), La-Z-Boy (LZB), Whirlpool (WHR), Walt Disney (DIS), Carnival Corp. (CCL), Nike (NKE), and Tesla (TSLA). The consumer staples sector has outperformed all but one sector since 1962. According to the S&P Dow Jones Indices, for most of the 10 years ending April 26, 2021, the consumer staples sector returned 8.20% annually. These companies are essential to our daily life and do well even if the economy is waning. Choose from a list of exchange-traded funds or mutual funds selected by Morgan Stanley Smith Barney LLC.
- The survey also outlines what consumers expect in the near future in terms of key metrics such as inflation, interest rates, and stock prices.
- PG is one of the biggest employers in Cincinnati, Ohio, where it has its headquarters.
- The automobile industry designs, produces, and markets cars, SUVs, trucks, buses, and other types of vehicles for private, public, and commercial use.
- And companies that have invested gains in advertising and long-term brand building may have an added tailwind.
Among the best positioned for 2024 may be household products companies, due to sticky pricing, positive trends on sales volumes, and earnings flexibility. 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. To help you find the best consumer staples stocks, Forbes Advisor has profiled the 10 largest companies in this sector by market capitalization. Defensive stocks (like electricity and water) are relatively unaffected by economic volatility. Most people will spend much the same on them regardless of economic pressures.
Consumer staples stocks tend to pay solid dividends and keep paying them over the long term. In fact, they are well represented among the Dividend Aristocrats—firms that have increased their dividends annually for at least 25 consecutive years. Since then, KO has grown into a behemoth in the beverage industry and has spurred massive growth in the Atlanta region by investing incredible sums back into the community. Among other achievements, the company pioneered vertical integration by buying out its early bottlers, minting a number of millionaires in the process. A multinational, member-only big box chain, Costco is the fifth largest retailer in the world, according to the National Retail Foundation. The company operates 800 stores worldwide, though stores exist in fewer than 20 countries and almost 70% of its stores are located in the U.S.
Walmart is the world’s largest retailer, the world’s largest company by revenue and the largest employer, with over 2.2 million employees as of 2020. Worldwide, Walmart gets more than 260 million customer visits each year. For those who prefer to avoid crowds, there’s the members-only Sam’s Club and Walmart+ subscription delivery options as well. The household durables industry manufactures products that are bought infrequently and last for years. Examples include lawn and garden equipment, home and office furnishings, appliances, photographic equipment, and sporting goods.
Although the economic outlook remains uncertain, consumers are likely to continue to need the everyday products—from toothpaste to toilet paper— that staples companies produce and sell. When exactly sales volumes pick up may depend on the health of the consumer and economy. However, valuations in the sector remain compelling, especially given the potential for improving profit margins. 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. Investor sentiment also shifted against this segment due to worries about how new weight-loss drugs might impact demand.
In periods when the economy is doing well, consumer staples stocks may underperform other more dynamic sectors. However, spending on goods produced and sold by the consumer staples sector tends to be far less cyclical due to the lessened price elasticity of demand. Price elasticity is an economic concept that describes the change in consumer quantity demand as prices change. The demand for consumer staples goods remains fairly constant regardless of the state of the economy or the cost of the product. Investors tend to incorporate consumer staples as a defensive strategy and often look to the sector best crypto exchanges of august 2021 for a source of stability during market slumps and recessions.
She has worked in multiple cities covering breaking news, politics, education, and more. Further, if you want to try investing internationally—after all, people need staples the world over—the WisdomTree Emerging Markets Consumer Growth ETF (EMCG) and the iShares Global Consumer Staples ETF (KXI) are two options. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk. Get our industry-leading investment analysis, and put our research to work.