Although investors have enjoyed another strong season of returns in the equities market, it may be time to consider more reliable consumer goods stocks to buy. Primarily, the sentiment pivot on Wall Street suggests that surviving an onslaught – rather than thriving amid tailwinds – may be the name of the game.
Naturally, the first clue stems from the S&P 500 index. Up until the end of July, circumstances appear quite robust for the benchmark gauge of market health. However, since the aforementioned date, the index slipped rather heavily. And circumstances have been rough recently, with the index printing much red ink in the trailing month.
Fundamentally, the second clue comes from outside economic factors. While the Federal Reserve made some progress in facilitating a disinflationary trend, consumer prices remain stubbornly high. Also, with more interest rate hikes not out of the question, mass layoffs may materialize. Of course, such a circumstance would not bode well for growth-oriented enterprises. Therefore, arguably most signs point to cynical relevancies brewing for boring but reliable companies. With that, below are consumer goods stocks to add to your portfolio.
Consumer Goods Stocks: Procter & Gamble (PG)
A multinational giant and one of the most recognizable names among consumer goods stocks, Procter & Gamble (NYSE:PG) needs no introduction. Generally, P&G makes a solid case for retirement-based portfolios. It offers a consistent, relatively predictable business with consistent profitability. Should a recession materialize, the company should be a top idea to consider.
On the financials, P&G prints a three-year revenue growth rate of 6.9%, better than 51.55% of other consumer goods stocks. That’s really nothing special. However, here’s the main takeaway: the enterprise’s net margin clocks in at 17.87%, above 92.73% of the competition. It has posted net income over at least the past 10 years, making it a reliable investment.
Regarding passive income, P&G prints a forward yield of 2.58%. While not especially remarkable, the company has a track record of 68 years of consecutive dividend increases.
Finally, analysts rate PG a consensus moderate buy with a $169.50 price target, implying over 16% upside potential.
Another name among consumer goods stocks that requires no introduction, Colgate-Palmolive (NYSE:CL) offers a promising framework. Essentially, the company cynically provides a trade-down effect from going to the dentist. Let me just clarify that I’m not a health professional and you should always abide by their guidance regarding your wellbeing. Still, skipping out on certain procedures has long been a reality.
As an op-ed from The Washington Post revealed, people skipped out on going to the dentist during the Covid-19 pandemic. To be fair, that was for understandable public health concerns. Nevertheless, an economic pressure point can yield similar results. Therefore, CL could move higher based on this rather dubious narrative.
On the more pleasant side, Colgate offers a forward yield of 2.7%. Further, the payout ratio is reasonable at 55.5%. Also, the company has a history of 61 years of consecutive dividend increases. Lastly, analysts peg CL as a moderate buy with an $84.70 target, implying over 19% growth.
Consumer Goods Stocks: Kraft Heinz (KHC)
A multinational food company, Kraft Heinz (NASDAQ:KHC) makes an enticing case for consumer goods stocks to buy. For one thing, it’s one of the holdings of legendary investor Warren Buffett via his Berkshire Hathaway (NYSE:BRK-B) conglomerate. I’m not saying that the Oracle of Omaha is the end-all, be-all of deciding what to buy. Still, it’s a nice confidence booster.
Fundamentally, the other factor that drives Kraft Heinz is the aforementioned trade-down effect. Increasingly, if economic pressures build, people will stop going out to restaurants to eat. Instead, they’ll head over to their local grocery stores more often. Thanks to metrics like economies of scale and other competitive advantages, Kraft Heinz has a chance to attract these dollars.
Enticingly, Kraft Heinz offers a forward yield of 4.76%. That’s well above the average for consumer goods stocks at 1.89%. As well, the payout ratio is reasonable at 53.57%. To close, analysts peg KHC as a moderate buy with a $40.13 target, implying over 19% upside.
A multinational confectionery, food, and beverage company, Mondelez (NASDAQ:MDLZ) symbolizes an intriguing idea for consumer goods stocks to buy. As stated before, Mondelez – as a food and snack manufacturer – should benefit from the trade-down effect. Basically, fewer people will likely go to eateries to feed themselves. Instead, they’ll spend more dollars at grocery stores.
In fairness, I must admit that Mondelez’s three-year revenue growth rate of 8.6% isn’t all that impressive. Per investment data aggregator Gurufocus, that’s ranked better than only 57.2% of its peers. However, should economic conditions worsen, I expect the top line to expand due to financial realities.
Another reason to stay with MDLZ is its forward yield of 2.45%. While it’s not dramatically high, the payout did increase recently. Also, the payout ratio sits at 48.06%, providing confidence in terms of yield sustainability. Also, analysts peg shares as a consensus strong buy with an $83.18 target, implying nearly 20% upside.
Consumer Goods Stocks: Coty (COTY)
One of the riskiest ideas among consumer goods stocks, investors will need high conviction with Coty (NYSE:COTY). A beauty care specialist, Coty in my opinion offers a fundamentally relevant business. So far, the print agrees with me. Since the beginning of the year, shares gained about 25%. However, over the past six months, COTY has been conspicuously muted.
As a premium beauty care company, one could make the argument that Coty is not necessary. Thus, Coty could suffer from the trade-down effect, not benefit from it. At the same time, the enterprise’s core customers recognize how important the products are for holistic well-being. Further, the push among many companies to return to the office may lift COTY.
Let’s face reality here – companies aren’t necessarily their employees’ friends. Instead, they’re trying to get work done. And if mandates are required, folks have to return to the office or face heavy consequences. Therefore, I like COTY on the cynicism, even if it doesn’t pay a dividend right now. To make up for it, analysts rate shares a moderate buy with a $13.33 price target, implying almost 22% upside.
An easy choice among consumer goods stocks to buy in my opinion, Coca-Cola (NYSE:KO) makes plenty of sense. Yes, it’s one of Warren Buffett’s favorite holdings – and favorite products to consumers – but that’s not where I’m going. Rather, as society gradually normalizes (especially in the workplace as mentioned above), the search for caffeine will be intense.
Scratch that, the search for cheap caffeine will be intense, which is why Coca-Cola is so compelling. Yes, both consumers and worker bees can get their favorite lattes at a certain coffee shop that will not be mentioned. However, with inflation remaining stubbornly high, shopping at the coffee shop that shall not be named is getting incredibly expensive.
At some point, I believe folks will start conducting a serious cost-benefit analysis. Even if you can afford the luxury of caffeine, it just doesn’t seem worth it. Therefore, I’m digging KO, especially with its 3.29% forward yield and 62 years of consecutive dividend increases. Lastly, analysts peg KO as a strong buy with a $70.91 target, implying almost 27% growth.
Newell Brands (NWL)
An American manufacturer, marketer, and distributor of consumer and commercial products, Newell Brands (NASDAQ:NWL) offers an interesting case for consumer goods stocks. Per its public profile, Newell brands and products include Rubbermaid storage and trash containers, Contigo and Bubba water bottles, and Coleman outdoor products. It even offers writing instruments, children’s products, and cookware.
Basically, whatever you need, Newell has. And that’s going to be particularly important as consumers ditch premium-level services and begin shopping for their own needs; for example, shopping for food products and accessories rather than ordering takeout. With Newell offering a wide range of critical consumer products, it should see a relevance boost.
Just as well, Newell offers a forward yield of 3.1%, which is notably higher than the underlying sector average. Also, the payout ratio sits at 25.97%, providing confidence regarding yield sustainability. Finally, analysts rate NWL a moderate buy with a $12.89 target, implying nearly 43% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.