Consumer staples is regarded as the most conservative and defensive sector. No matter what the economic conditions, people still buy staples...
Consumer staples is regarded as the most conservative and defensive sector. No matter what the economic conditions, people still buy staples like toothpaste to coffee. In other words, consumer staples are the products that people need in their day-to-day lives, and will commonly purchase despite the state of the economy. Most often consumer staple companies offer products like razors, tobacco, laundry detergent, toothpaste, and so on.
Well, when it comes to the growth rate of these companies, it is limited due to intensive competition as big box retailers have forced prices to remain lower. Big retailers like Walmart and others are able to dictate prices to suppliers by putting a check on them. This results in keeping the consumer prices lower no matter the pressure it puts on the smaller retailers. Consumer staple is a defensive sector that will outperform the time when equity markets are more bearish and under perform when bullish.
Moreover, there is an assortment of ETFs devoted to the sector providing the U.S. global exposure. Most of them are linked to established indexes tied to well-known index providers that include S&P, Russell, Dow Jones, Wisdom Tree, Barclays, EG Shares, MSCI, etc.
Here is a list of companies that find a spot on the leading consumer staples firms. It is based on the minimum market cap threshold of $10 billion. Next criterion is the yearly market performance. Another is stocks pricing up by 5 percent or more this year. In order to steer away from those firms which have high levels of debt, the limited acceptable debt-equity ratio of 1 or less is required. Furthermore, those with a dividend yield of 1.5 percentage or more than that are also counted in.
- Kraft Heinz Co.
This world’s fifth-largest food and Beverage Company formed from the 2015 merger of Kraft and Heinz. This merged company seems to be performing well; even the market tells the same tale. KHC stock is also attractive for its low debt-equity ratio of 0.44. And, the current stock price (till 15 September 2016) is 87.36 with 1,967,612 volumes.
- Procter & Gamble Co.
The next on the list is Procter & Gamble which is a Dow Jones industrial average component with a market capital exceeding $225 billion. Their stocks have attractive low debt and 3.2 percent dividend yield. This firm has earned 76.27 billion USD as the revenue in 2015 according to the report issued by it. Their current stock price is 88.37 with 19,173,907 volumes.
- Reynolds American
This is the second-largest tobacco company in the United States of America. Its holdings include American Snuff Company, Niconovum AB, R.J Reynolds Tobacco Company, and Santa Fe Natural Tobacco Company. The current value of its stock is $47.38 and 3.3 percent dividend yield as well as a good track record of raising its dividend payment.
- J.M Smucker Co.
J.M Smucker is a popular U.S. consumer brand founded in 1897 specializing in fruit spreads, shortening (Crisco) and peanut butter (Jif). It has a market capital of $15.9 billion, and in the coming years, it seems like it would capture a bigger share of the market with its high-quality products. The present market share price is 137.03 USD with 725,775 volumes.
- McCormick and Co.
Sparks, Maryland-based McCormick and Co. produces spices and herbs for commercial as well as retail markets. It was founded in 1889, Baltimore, Maryland, United States. This firm has been a stronger performer in the last few years, and has impressed the market experts with its performance. Presently, its stock prices are US$ 96.38 with the earnings growth +10.00%.
The consumer staple market has witnessed a sudden downfall in the past decades due to the changes in consumers’ tastes and spending habits. In addition to this, currency is the major factor behind this change. But, you must remember that foreign-exchange fluctuations are generally short-term. With a strong customer base, this defensive sector is likely allow itself to hold up well in relation to more economically sensitive equity sectors.