Key Points
- Consumer staples stocks are companies that sell inelastic products like food, beverages and cleaning supplies.
- Stocks in this sector are some of the oldest and most well-known brands in the world, but their stocks tend to lag in booming markets.
- When inflation is high and uncertainty rampant, consumer staples stocks are a good place for investors to park capital and earn income through dividends.
- 5 stocks we like better than Consumer Staples Select Sector SPDR Fund
Looking for consumer staples dividend stocks?
When investors are uncertain, they often look to consumer staples stocks since these companies sell things we can't go without, such as food, beverages and household products.
When inflation is high, investing in consumer staples stocks with dividends can be a sound strategy for earning income while preserving capital.
In this article, you'll learn about some of the best consumer staples dividend stocks and how they can stabilize your portfolio.
What Are Consumer Staples Dividend Stocks?
The consumer staples sector is home to some of the most recognizable brands in commerce. While many of these companies are solid blue chips, the consumer staples sector claims few headlines since these firms may seem old and unexciting. You won't find companies making technological or medical breakthroughs in this space, and their stocks tend to underperform in bull markets. But 2022 was a strong year for consumer staples as inflation affects these companies less than their peers.
Investing in consumer staples isn't a path to quick riches, but when economic uncertainty is rampant, the sector is a good hiding place. For starters, the companies in this sector sell items with inelastic demand, meaning that consumers buy them regardless of economic conditions. This doesn't mean they're recession-proof, but sales won't plummet in downtimes since everyone needs to eat, drink, wear clothes and clean their living space.
The sector opposite of consumer staples would be consumer discretionary, where companies sell products with elastic demand, like cars, travel and luxury items. One advantage consumer staples have over consumer discretionary is pricing power. During inflationary periods, consumer staples stocks can raise prices easier than other sectors since consumers need their products daily. If you want to buy a car, you'll wait until prices come down. But you aren't waiting for inflation to fade when shopping for bread, toilet paper and shower gel.
Yield is the name of the game, and high-yield consumer staples stocks could see elevated demand if inflation persists. Here are 14 consumer staples stocks to add to your list.
14 Best Consumer Staples Dividend Stocks
Dividends are periodic payments made to investors from a company's profits. When a firm doesn't need to retain earnings for research and development, it often returns some of these profits to shareholders through dividends. Some sectors (like tech) tend to retain more earnings than others for new projects, but since consumer staples stocks aren't usually too concerned with growth and new products, they usually pay dividends at a higher rate.
When searching for consumer staples stocks with high dividends, yield isn't the only barometer to use when performing due diligence. Ensure the stocks you're researching have manageable dividend payout rates (DPR) and strong outlooks to maintain the dividend.
Consumer Staples Select Sector SDPR Fund
The easiest and most convenient way to add consumer staples dividends stocks to your portfolio is through the Consumer Staples Select Sector SDPR Fund NYSE: XLP, which offers exposure to 33 companies in the sector for a manageable expense rate. The fund has over $16 billion in assets and currently yields 2.5%. Many consumer staples ETFs exist on the market. XLP has the lowest expense rate and the most liquidity while offering broad exposure to some of the largest and safest publicly-traded companies.
Tyson Foods Inc.
Americans aren't going to stop eating wings and chicken sandwiches. Tyson Foods Inc. NYSE: TSN is one of the country's largest producers of frozen foods, mainly meat products like chicken, pork and beef. The company has a $21 billion market cap and a strong dividend with a reasonable DPR and an 11-year history of payout raises. Tyson's stock struggled in 2021 through supply chain disruptions, but the company has the pricing power to combat inflation, and its current stock valuation looks affordable.
International Flavors and Fragrances Inc.
International Flavors and Fragrances Inc. NYSE: IFF produces food additives and scents through four different divisions spread out across the globe. IFF sells its products to the cosmetic and food industries, especially companies producing perishable food like meat and dairy. The company has been a strong dividend stock throughout its history and currently boasts a 20-year dividend payout raise streak. After languishing in 2022, the stock could rebound as investors seek high dividend consumer staples stocks to strengthen their portfolios.
McDonald's Corp.
You likely don't need a description of McDonald's Corp.’s NYSE: MCD leading business practices, but it does have a unique structure that creates more revenue opportunities than typical fast food chains. The McDonald's Corporation owns almost half the land where its restaurants sit, which allows it to collect rent and royalty fees. Owning property enables the company to weather economic cycles more than other restaurant brands, resulting in McDonald's becoming the second-largest private employer in the world. The company has also raised dividend payouts for an impressive 46 straight years, although the DPR has increased over 70% in recent years.
The Kraft Heinz Company
Following a 2015 merger, The Kraft Heinz Company NASDAQ: KHC is now one of the world's largest food and beverage producers. The conglomerate is behind many of the most recognizable brands in the grocery store, such as Oscar Mayer and Planters, along with its two namesake lines. Recently, the company has also expanded into healthy and natural food products. The dividend yield is high, but so is the DPR, and the company was forced to cut its payout in 2018. Since then, Kraft Heinz has been a reliable dividend payer with plenty of upsides as it enters the healthy and organic niche.
Altria Group Inc.
Cigarette manufacturers may be a dealbreaker for some investors, considering all the terrible health conditions smoking causes. But tobacco companies understand these negative externalities and reward shareholders with sizable dividend payouts. One of the strongest dividend payers is Altria Group Inc. NYSE: MO, which produces tobacco products like Marlboro, Skoal and Black and Mild under its subsidiaries Philip Morris and John Middleton Inc. As for the dividend, Altria currently yields a whopping 8% and has raised payouts for 13 straight years.
McCormick and Company Inc.
Another recognizable name from the grocery store, McCormick and Company Inc. NYSE: MKC manufactures spices, condiments and food seasoning through two different segments: consumer and flavor solutions. Some of McCormick's most popular products include Frank's Red Hot, Lowry's Seasoned Salt, French's and Old Bay. McCormick is a strong dividend payer, too, with 37 years of payout raises and a manageable DPR.
The Coca-Cola Company
The Coca-Cola Company NYSE: KO brand is one of the stalwarts of American commerce. With more than 130 years of business history, the company has been manufacturing its trademark soft drinks for longer than anyone reading this has been alive. In addition to Coke, the company is responsible for soft drink brands like Powerade, Sprite, Dasani, Sweppes, Minute Maid and Fanta. The Coca-Cola Company is also a true Dividend King, with a 62-year history of payout raises and a market cap north of $250 billion.
Mondelez International Inc.
Yep, there's a theme here, as Mondelez International Inc. NASDAQ: MDLZ is yet another food and beverage company behind some of the industry's most recognizable brands. Mondelez has a global reach focused mainly on snack foods and drinks. Some brands under their wing include Nabisco, Oreo, Cadbury and Trident. The company has a $90 billion market cap and has now raised its dividend payout for 10 consecutive years.
Proctor & Gamble Company
In some respects, Proctor & Gamble Company NYSE: PG is the original consumer staples stock and remains one of the country's biggest and most successful companies. Proctor & Gamble has been a portfolio mainstay for generations of investors, with a market cap of over $300 billion and nearly 200 years of business history. The company features household and consumer product brands like Tide, Crest, Gillette, Vicks, Pampers and Herbal Essences. Few companies have more robust dividends, too; Proctor & Gamble has raised payouts for 67 straight years while keeping its DPR under 70%.
PepsiCo Inc.
The main competitor to Coca-Cola, PepsiCo Inc. NASDAQ: PEP is another of the most recognizable brands in the world. In addition to soft drinks like Pepsi, Mountain Dew and Gatorade, the company also makes grocery products under brands like Quaker, Pearl Milling and Rice-A-Roni and cereals like Cap'n Crunch and Life. PepsiCo is also a Dividend Champion, with 51 years of consecutive payout raises.
Colgate-Palmolive Company
One of the biggest staples in the household products industry is Colgate-Palmolive Company NYSE: CL, which has been in business since 1806. Colgate-Palmolive makes soaps, hygiene and oral care products under brands like Speed Stick, Tom's of Maine and Irish Spring. The company also has a pet food segment, which produces Hill's Science Diet and Hill's Prescription Diet for cats and dogs. Colgate is also another Dividend Champion with 60 years of payout raises.
Ambev SA
Thanks to its hard and soft drink products, Brazilian beverage manufacturer Ambev SA NYSE: ABEV is one of the top international consumer staples firms. The company produces a variety of beer and malt liquors, as well as carbonated sodas and teas. In 2016, the firm merged with Anheuser-Busch and now produces beers under the Budweiser, Busch, Modelo, Corona and Stella Artois brands. The company also bottles and distributes beverages from other companies, like Pepsi and Gatorade from PepsiCo. AmBev recently started paying dividends, yielding higher payouts than most consumer staples stocks.
Newell Brands Inc.
One of the lesser-known consumer staples dividend stocks is Newell Brands Inc. NASDAQ: NWL, whose $5 billion market cap pales in comparison to others on this list. However, Newell has various brands under its household and consumer products divisions, such as CrockPot, Rubbermaid, Elmer's, Paper Mate, Sharpie and Mr. Coffee. Newell also currently sports a dividend yield of over 6%, although recent profit dips could jeopardize its payout.
Limited Upside but Safety in Uncertain Periods
When times are uncertain, investors frequently turn toward consumer staples stocks to protect their capital and earn income from dividends during rough periods. But these stocks may seem boring because, well, they are. Selling food, beverages and household products aren't the types of businesses that lead to quick stock appreciation, and investors tend to overlook these companies when markets swing upward. But consumer staples stocks have products consumers need and the pricing power to navigate inflationary periods.
FAQs
Here are a few frequently asked questions about consumer staples dividend stocks.
Are consumer staples a good investment?
When inflation is high and markets are choppy, consumer staples stocks can make an excellent investment thanks to their low volatility and high dividend payouts. But in bull markets and booming economies, these stocks tend to underperform.
What stock has the highest dividend return?
It’s common to want to find consumer staple stocks with high dividends and high yield consumer staples stocks. Among consumer staples stocks, cigarette manufacturers like Altria Group pay the highest dividend yields. And unlike other high-yielding firms, these dividends are sustainable.
What are three stocks to buy and hold forever?
Dividend Champions are the stocks that investors can hold for a generation. These companies include The Coca-Cola Company, Proctor and Gamble and Colgate-Palmolive.
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