In fact, according to The Motley Fool, about 11.58% of the billionaire’s holdings are in consumer staples stocks. That includes familiar names such as Coca-Cola, Kraft Heinz, and Procter & Gamble, according to U.S. News & World Report.
Buffett sees that minimal volatility and well-charted returns make consumer staples hard to ignore. On top of the minimal volatility, consumer staples equities tend to be great dividend stocks, which already have high dividend yields and produce decent payout growth.
If you’re curious to see for yourself, consider these top consumer staples stocks.
Best Consumer Staples Stocks to Buy in 2021
Although many consumer staples stocks have a strong track record, there are always some stocks that outperform others in any sector. The stocks listed below arguably have the potential to be the best-performing stocks in the category.
1. Coca-Cola Co. (NYSE: KO)
- Earnings: Over the past four consecutive quarters, the company has beaten analyst expectations in terms of earnings per share, according to Nasdaq.
- Dividend History: According to YCharts, Coca-Cola stock offers an impressive 3.08% dividend yield. The company has increased its dividend payments consistently, even through economic hardships and the COVID-19 pandemic. Over the past five years, the yield on the stock has seen a low of 2.66%, a high of 4.29%, and has averaged out around 3.22%.
- Market Capitalization: With a market cap of more than $244.5 billion, Coca-Cola is one of the largest companies in the U.S.
Over the years, consumers have become more conscious of what they’re putting into their bodies when they eat and drink. This has led to some concerns for Coca-Cola because the company’s flagship product is a high-sugar soft drink.
Nonetheless, the company’s stock has seen consistent growth, along with increased revenue, earnings, and dividends. After all, the company holds 43.7% of the non-alcoholic-beverages market share in the United States according to Statista.
When it comes to dividend growth, the company has increased payments to its investors every year for the last 59 years, according to Dividend.com, and that trend isn’t likely to stop.
The reason the company has been so successful, even in the face of health-related headwinds, has to do with its diversified portfolio for consumer staples products.
Although the company’s flagship product, the Coca-Cola soft drink, is the most successful soda of all time, it’s not the only trick the company has up its sleeve. Coca-Cola is also behind several healthy lifestyle and energy drink products, including Powerade, Dasani Water, and vitaminwater.
Generating more than $30 billion dollars in revenue annually and seeing consistent growth in earnings per share, the stock is a strong investment play.
Pro tip: David and Tom Gardener are two of the best stock pickers. Their Motley Fool Stock Advisor recommendations have increased 597.6% compared to just 133.7% for the S&P 500. If you would have invested in Netflix when they first recommended the company, your investment would be up more than 21,000%. Learn more about Motley Fool Stock Advisor.
2. General Mills (NYSE: GIS)
- Earnings: The company has beat analyst expectations in terms of earnings per share in three out of the past four quarters according to Nasdaq.
- Dividend History: Over the past four years, dividend yields on the stock have ranged from 2.91% to 5.34%, for an average of an impressive 3.64% yield.
- Market Capitalization: General Mills is currently valued at more than $38.5 billion, making it yet another massive company.
General Mills has become a household name as the manufacturer behind popular cereals like Cheerios, Lucky Charms, and Chex. However, the company is no one-trick pony. The company produces everything from yogurt to full meals found in your local grocery retailer’s freezer section.
Over the years, like most big names in the consumer staples sector, General Mills has a long history of producing organic sales growth, which has equated to growing revenues, earnings, and stock prices on a relatively consistent basis.
The company isn’t shy about showing its investors they’re appreciated either. General Mills is known for returning value to its shareholders through share buybacks and a consistently strong dividend payout.
In fact, the current dividend yield on the stock is 3.21%, paying out about $2 per year to shareholders for each share of stock owned over the past year.
The consumer staples goliath has also shown its resiliency to tough market conditions throughout the course of the coronavirus pandemic. Although many stocks across the market took a big hit early in 2020 and again leading up to the 2020 elections, General Mills isn’t one of those stocks.
Even through one of the toughest economic and social times in the United States, the stock has seen more than 20% growth since March 2020, and will likely continue more of the same through the remainder of 2021.
With a strong history of incredible market performance, competitive dividend payouts, and growth in both revenue and earnings, General Mills has become a prime pick among investors looking to fill a spot in their portfolios and is well worth considering for yours.
3. Clorox (NYSE: CLX)
- Earnings: Clorox has beaten analyst expectations for earnings per share in three of the four past quarters. Over the past four quarters, even with a major hiccup in the quarter ended June 2021, the company has produced an average positive earnings surprise of over 5%.
- Dividend History: Clorox is also known for maintaining a relatively stable dividend. Over the past four years, yields have ranged from 1.8% to 3.03%, with an average of 2.43% over the period.
- Market Capitalization: The stock trades with a market cap of more than $20.8 billion.
Clorox is one of the largest cleaning supply companies in the world. Chances are you have one or more of their products under your kitchen sink right now.
Founded in 1913, the Clorox brand has become synonymous with bleach and cleaning supplies. It’s the company behind Clorox Bleach, Tilex, Pine-Sol, S.O.S., Green Works, and a long list of other cleaning products.
The company also has a relatively diverse portfolio of products. Although most of these products are in the cleaning space, Clorox has seen success in other sectors with brands like Kingsford, Brita, and Hidden Valley.
Like all other consumer staples stocks on this list, Clorox is known for delivering strong growth in revenue and year-over-year earnings. The company has also consistently paid decent dividends, with a current yield of over 2.68%. All of these factors have led to long-running, relatively consistent growth over the years.
In 2020, Clorox saw a dramatic rise in value as a result of COVID-19. After spiking early in 2021, the stock went on a downtrend as investors began to take profits. Nonetheless, the selloff in the stock is largely overblown, creating an opportunity to get in on future gains at a discount.
While vaccines are starting to reach consumers and COVID-19 case counts are declining, consumers put more emphasis on cleanliness than they did before the pandemic, and will likely continue to do so.
As a result, the cleaning supplies sector as a whole is expected to see a continuation of growth in demand. At the beginning of the pandemic, it became difficult to find Clorox products on shelves, as the company couldn’t keep up with the massive amount of cleaning products consumers were purchasing.
That supply chain problem has been solved for the most part and demand for cleaning products isn’t likely to slow any time soon. Moreover, there’s a valid argument that even following the pandemic, the virus will remain so deeply ingrained in the minds of consumers that demand for cleaning and hygiene products isn’t going to slow.
As a result, Clorox stock may have plenty more room to climb ahead.
Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Trade Ideas can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.
4. Procter & Gamble Co (NYSE: PG)
- Earnings: The company has produced compelling earnings over the past four consecutive quarters, beating analyst expectations in each quarter. The average earnings surprise over the past four quarters has been 5.32%.
- Dividend History: According to YCharts, Procter & Gamble has maintained an average dividend yield of 2.79% over the past five years.
- Market Capitalization: Procter & Gamble currently trades with a market cap of more than $357 billion, representing yet another of the largest companies in the U.S.
Procter & Gamble has been around for almost 200 years and has seen incredible success throughout the centuries. Today, the company has 22 well-known brands that each generate more than $1 billion in annual revenue, alongside a long list of lesser-known brands that helped the company generate nearly $71 billion in revenue in 2020.
Some of the company’s most recognized brands include Tide, Crest, and Gillette. However, these massive brands only represent a small portion of the company’s lineup in paper products, laundry detergents, diapers, and beauty products.
Procter & Gamble’s share price has seen a strong recovery from severe declines caused by the initial wave of COVID-19. After all, consumers aren’t likely to stop cleaning their clothes or brushing their teeth anytime soon. Although economic fears hit hard early on, investors are expecting to see a continuance in the sales and earnings growth the company is known for.
Early in 2021, investors started taking profits on the stock. This drove prices down nearly 10%. Nonetheless, the move proved to be short term and the stock has recovered, although there’s still a compelling argument that the stock is significantly undervalued.
The company is also constantly innovating. Most recently, it developed and launched a safe, naturally derived line of insect repellent products known as Zeno. It also recently launched a line of plant-based cleaning products called Home Made Simple that it expects to be met with strong demand as strong consumer demand for cleaning products meets a widespread movement to go green.
When it comes to dividends, the company has a history of providing a consistently strong dividend payout, with a current yield of 2.3%. Moreover, the company has a history of impressive dividend growth.
As Procter & Gamble continues to innovate, drive compelling sales, and show appreciation to its investors through aggressive dividend payments, the stock becomes harder and harder to ignore.
5. Walmart (NYSE: WMT)
- Earnings: The company has a relatively consistent history of beating analyst expectations in terms of earnings per share, having done so in three out of the past four quarters. The average earnings surprise over the past four quarters has been 14.32%, which is even more impressive when you consider a hiccup that led to a negative 7.95% earnings surprise in one quarter included in this average.
- Dividend History: Over the past four years, dividend yields on Walmart stock have ranged from 1.41% to 3.05%, with an average over the past five years of 2.03%.
- Market Capitalization: Walmart trades with a market cap of nearly $410 billion.
Next up is a name that you likely know well as one of the largest retailers in the world: Walmart. When you read the name, you might have questioned its position in the consumer staples category — after all, isn’t Walmart in the retail game?
You’re right, the company is one of the world’s most successful retailers. Then again, companies that see tremendous success in one area often branch out to use their strengths in others, and Walmart has dug deep into several different sectors. One of the biggest of these is consumer staples products, which it sells exclusively in Walmart and Sam’s Club stores.
These products are labeled with the Great Value brand and offer low-cost alternatives to some of the most popular consumer staples products on the market across various categories.
The company manufactures everything from paper towels to cleaning supplies, paper plates, and utensils to food products like cereals and microwave dinners. The company also markets the Equate brand, offering up a long list of medications and other health care and hygiene products.
Going a step further, an investment in Walmart doesn’t just give you access to their strong portfolio of products, it provides exposure to one of the world’s most successful retailers, both in e-commerce and in the brick-and-mortar sense.
Walmart was another stock that has done overwhelmingly well, even throughout the coronavirus crisis. Walmart was one of few stores that stayed open throughout the pandemic, offering both essential items like food and medicine and nonessential items like swimming pools and skateboards.
This made a huge difference as bored consumers looked for activities to keep their minds busy while they were forced to stay home.
Although Walmart’s dividend yield is relatively low compared to other consumer staples stocks, sitting at 1.49%, the strong historic price appreciation seen in the stock outweighs the light dividends.
All in all, Walmart is a household name and the go-to store for just about anything for many. As a result, the company has delivered consistently impressive performance through good economic times and bad. All in all, the stock is a relatively safe bet that’s known for producing strong gains. What more could you ask for in an investment?
6. Altria Group (NYSE: MO)
- Earnings: The company has a strong history of beating earnings expectations. In the past four quarters, the company outpaced analysts twice, with an average positive earnings surprise of 0.715%.
- Dividend History: Altria Group comes with an incredibly high dividend yield, clocking in at 7.70%, making it a great option for investors looking to generate income through their portfolios. Over the past five years, yields have ranged from 3.07% to 10.45%, with an average of 5.90%.
- Market Capitalization: The stock trades with a market capitalization of more than $82.9 billion.
Altria Group is a bit of a taboo consumer staples company, but with incredible historic growth and a strong start to the year that says this growth will continue, it’s well worth considering. The company is one of the largest tobacco companies in the world, which takes investing in consumer staples to the next level.
After all, investing in consumer staples is all about investing in products that consumers are going to buy regardless of economic conditions. Tobacco users are addicted to tobacco products, meaning that when they stop using these products, withdrawals take place. As a result, Altria Group has largely captured its audience.
However, that’s not the only reason to buy the stock. Over the past couple of years, the company has watched as the vape industry took market share from the tobacco cigarette, cigar, and chew markets.
As is the case when any large company sees new options taking market share, Altria Group launched its own vape product, known as the Juul, which has quickly grown to become a leading option among vape users.
The company also sees incredible opportunities in the cannabis market as experts suggest that federal legalization for adult-use cannabis is likely to take place in the United States relatively soon. In fact, the company paid $1.8 billion to buy a 45% stake in one of the largest cannabis companies in Canada, known as Cronos group.
Should federal legalization of adult-use cannabis take place in the United States, the company is ready to dive into the market, likely taking a leadership position from the very beginning.
To make for an even better opportunity, investors have recently started taking profits on the stock, driving share prices down more than 10%. While this may be a concerning move to many, the declines likely represent nothing more than an opportunity to get in on future gains at a discount.
All told, if you’re a social impact investor, Altria Group may not be the best choice, but if your core focus is growth prospects over the long term, the stock is one that’s hard to ignore.
7. Costco Wholesale Corporation (NASDAQ: COST)
- Earnings: Costco has a relatively strong historic performance in terms of earnings. Over the past four quarters, the company has beat earnings expectations three times with an average positive earnings surprise of 7.66%. In the quarter the company missed expectations, the negative earnings surprise was 11.57%.
- Dividend History: Over the past five years, dividend yields on Costco stock have ranged from 0.59% to 1.26%, with an average yield of 0.96%, offering small but relatively consistent dividend payments.
- Market Capitalization: Costco trades with a market cap of more than $230 billion.
Costco is one of the largest wholesale clubs in the United States, with more than 820 locations spread across the United States. The claim to fame for the company is deep discounts offered to members for purchasing groceries, clothing, books, home goods, and several other products in larger quantities than found at other retail outlets.
While the dividends on the stock are relatively low at around 0.59%, investors have enjoyed compelling dividend growth as of late, with the average annual dividend growth over the past five years clocking in at 11.86%.
There’s a strong argument that buying in bulk in exchange for savings will see increased demand among consumers as the world recovers from the COVID-19 pandemic. As you see when you pull to the pump or purchase a gallon of milk, prices are beginning to rise across the United States.
Unfortunately, for many, that’s a real problem since they haven’t yet recovered from the pandemic. As a result, many suggest that consumers will be looking for ways to save, with shopping at warehouse stores like Costco being one of the best ways to go about saving money on day-to-day necessities.
All told, the company has a long history of strong performance and there are no expectations that we’ll see a change in this trend. Moreover, with the likelihood that consumers will be looking for ways to save money growing, demand for Costco memberships (and, therefore, its sales) is expected to climb. As a result, the stock should be on your watchlist.
Consider Investing in Consumer Staples ETFs
Purchasing individual stocks in any sector can be a daunting task. After all, the most successful investments are born in research, and maintaining a well-diversified portfolio of individual stocks will take quite a bit of time and effort.
For many investors, exchange-traded funds (ETFs) are often the best route.
If you don’t have the time, or simply don’t trust your ability to research stocks, you can rest assured that most consumer staples-focused ETFs are well-diversified portfolios that give you the ability to invest in the sector as a whole without having to assess each and every individual stock you’re holding.
As is the case with individual stocks, not all ETFs are created equal. Make sure to look into historic performance, asset allocation, and expense ratios of any ETF you’re considering before diving in.
Although consumer staples stocks are far from a viable way to get rich quickly, Warren Buffett will tell you they’re a great way to get rich over time.
Thanks to their position as producers of staple products ingrained in the consumer’s lifestyle, consumer staples companies are known for increasing revenues and earnings and relatively steady growth in the stock market.
As a result, if you’re looking for buy-and-hold opportunities, consumer staples stocks should make up a large part of your portfolio. It’s important to remember that although this list contains some of the top staple stocks in my opinion, it’s still based on my personal opinion.
Disclosure: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers Team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.