Consumer staple stocks offer stability and steady demand, even during economic downturns. These companies produce essential products that people need regardless of the economic condition, making their revenue streams reliable. They often provide strong dividend yields, serve as a hedge against inflation, and have loyal customer bases.
Given the industry tailwinds, it could be wise to invest in fundamentally sound consumer staple stocks Colgate-Palmolive Company (CL), Altria Group, Inc. (MO), and The Kroger Co. (KR) for long-term gains.
The U.S. monthly inflation remained the same in May as minor increase in the cost of services was offset by the most significant drop in goods prices in the last six months, resulting in bringing the Federal Reserve closer to starting cutting interest rates later this year. With this, consumer spending rose marginally last month, strengthening the hope of a "soft landing" for the economy.
The Commerce Department's Bureau of Economic Analysis reported that the flat personal consumption expenditures price index last month followed an unrevised 0.3% gain in April, and the PCE price index surged 2.6% after advancing 2.7% in April in the 12 months through May.
Also, consumer spending in the United States reached an all-time high of $15.64 trillion in the first quarter of 2024, with disposable personal income reaching $20.85 trillion in April 2024. Also, value added in the consumer goods market is expected to amount to $2.80 trillion in 2024.
Further, the staple market is projected to grow to $308.18 billion by 2032, exhibiting a CAGR of 4.3% driven by increased demand for essential consumer goods, emphasis on sustainability, and eco-friendly materials. Also, with technological advancements and enhanced customer experience, the retail market size is anticipated to reach $42.76 trillion by 2028, growing at a CAGR of 8.1%.
Given the industry’s robust outlook, investing in quality consumer staple stocks such as CL, MO, and KR could be wise for future gains.
Colgate-Palmolive Company (CL)
CL manufactures and sells consumer products internationally. It operates in two segments: Oral, Personal, and Home Care; and Pet Nutrition. The company offers toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants.
On June 14, CL’s Board of Directors declared a quarterly cash dividend of $0.50 per common share, payable on August 15, 2024, to shareholders of record on July 19, 2024.
CL pays an annual dividend of $2.00 per share, which translates to a yield of 2.04% on the current share price. Its four-year average dividend yield is 2.33%. The company’s dividend payouts have grown at a CAGR of 3.1% over the past three years. CL has raised its dividends for 60 consecutive years.
CL’s trailing-12-month gross profit margin and EBIT margin of 59% and 20.83 are 66.6% and 123.9% higher than the industry average of 35.42% and 9.31%, respectively. Its trailing-12-month net income margin of 13.22% is significantly higher than the industry average of 5.05%.
CL’s net sales for the first quarter that ended March 31, 2024, increased 6.2% year-over-year to $5.07 billion. Its non-GAAP operating profit grew 15.3% from the year-ago quarter to $1.08 billion. Non-GAAP net income attributable to CL came in at $713 million and $0.86 per share, up 17.3% and 17.8% from the prior year’s quarter, respectively.
Analysts expect CL’s revenue and EPS for the second quarter (ending June 2024) to increase 4% and 12.5% year-over-year to $5.01 billion and $0.87, respectively. Furthermore, the company has topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of CL have surged 23.4% over the past six months and 29.6% over the past year to close the last trading session at $97.82.
CL’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CL has an A grade for Quality and a B grade for Sentiment, and Stability. It is ranked #8 out of 53 stocks in the B-rated Consumer Goods industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of CL for Growth, Value, and Momentum. Get all CL ratings here.
Altria Group, Inc. (MO)
MO manufactures and sells smokeable and oral tobacco products. The company provides cigarettes primarily under the Marlboro brand, large cigars and pipe tobacco under the Black & Mild brand, moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands.
On June 21, MO announced that the FDA issued marketing orders for NJOY ACE Pod Menthol 2.4%, NJOY ACE Pod Menthol 5%, NJOY DAILY Menthol 4.5%, and NJOY DAILY Extra Menthol 6%. The authorizations follow FDA review of the Premarket Tobacco Product Applications, submitted by NJOY, LLC in March 2020.
Through first quarter 2024, NJOY broadened distribution to over 80,000 stores and will expand to over 100,000 stores by year-end. The new portfolio addition of NJOY menthol e-vapor products positioned MO with an FDA-authorized portfolio to support adult smokers in their transition to smoke-free alternatives.
Also, on May 20, MO’s NJOY submitted a supplemental Premarket Tobacco Product Application to the FDA to commercialize and market the NJOY ACE 2.0 device. The device incorporates access restriction technology designed to prevent underage use via Bluetooth® connectivity to authenticate the user before unlocking the device.
For the first quarter ended March 31, 2024, MO reported net revenues of $5.58 billion. Its gross profit was $3.28 billion and operating income was $2.67 billion for the quarter. The company’s net earnings of $2.13 billion, indicates growth of 19.1% year-over-year, while its adjusted EPS came in at $1.15.
Street expects MO’s revenue for the second quarter (ending June 2024) to increase marginally year-over-year to $5.47 billion, while its EPS is expected to grow 2.3% year-over-year to $1.34 for the same period. For the fiscal year 2024, the company’s revenue and EPS are expected to increase 1.1% and 3% year-over-year to $20.72 billion and $5.10, respectively.
Over the past six months, MO’s stock has gained 13.2% and 2.5% over the past year to close the last trading session at $45.51.
MO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality. Within the B-rated Tobacco industry, MO is ranked #4 out of 10 stocks.
Click here to access additional ratings of MO for Sentiment, Value, Momentum, Growth, and Stability.
The Kroger Co. (KR)
KR operates as a food and drug retailer. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses.
On June 27, KR’s Board of Directors approved a dividend increase from $1.16 to $1.28 per year. The quarterly dividend of $0.32 per share will be paid on September 1, 2024, to shareholders of record as of close of business on August 15, 2024.
KR pays an annual dividend of $1.28 per share, which translates to a yield of 2.35% on the current share price. Its four-year average dividend yield is 1.99%. The company’s dividend payouts have grown at a CAGR of 17.2% over the past three years. Kroger has raised its dividends for 16 consecutive years.
KR’s 9.66% trailing-12-month Return on Total Capital is 37.2% higher than the 7.04% industry average. Its trailing-12-month ROCE of 18.28% is 62.3% higher than the 11.26 industry average. Further, the stock’s trailing-12-month Asset Turnover Ratio of 2.95x is 250.4% higher than the industry average of 0.84x.
For the first quarter that ended March 31, 2024, KR’s sales increased marginally year-over-year to $45.27 billion and its operating profit was $1.29 billion. Net earnings attributable to KR came in at $947 million and $1.29 per common share, respectively.
In addition, the company’s cash and cash equivalents stood at $345 million as of May 25, 2024, compared to 241 million as of May 20, 2023.
Analysts expect KR’s revenue for the third quarter (ending October 2024) to increase 1% year-over-year to $34.31 billion and the company’s EPS for the same quarter is expected to grow 3.7% year-over-year to $0.99. Moreover, the company topped the consensus EPS estimates in all of the trailing four quarters.
KR’s stock has surged 9.7% over the past six months and 5.6% over the past year to close the last trading session at $49.54.
KR’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
KR has a B grade for Value and Quality. The stock is ranked #15 among 36 stocks in the A-rated Grocery/Big Box Retailers industry.
To access KR’s other ratings for Sentiment, Stability, Momentum and Growth, click here.
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CL shares were trading at $97.05 per share on Friday afternoon, down $1.12 (-1.14%). Year-to-date, CL has gained 23.19%, versus a 15.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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