With market volatility on the rise again and signs that an economic recovery might take longer than initially expected, now is the perfect time to look towards consumer staples for investment opportunities. These stocks are interesting because they are companies that produce essential goods that people use on a regular basis. This insulates consumer staples companies from recession risks and helps them hold up better during bear markets. Many of these stocks deliver nice dividend yields and consistent earnings that can offer a nice balance to any portfolio.
While we don’t know how long the current correction will last or what the economy will look like in the coming months, adding shares of great consumer staples stocks can pay off regardless of what the future holds. This is especially true if the businesses can continue growing after the pandemic subsides. These stocks are lower risk and less volatile than some of the high-flying growth stocks that have performed so well this year, which is certainly attractive during a time with a lot of uncertainty in the market. Keep reading below for insight into 3 consumer staples stocks to buy during the correction.
If you are interested in a consumer staples company that is seeing a dramatic surge in demand for its products, look no further than Clorox (NYSE:CLX). The company is the world’s largest producer of disinfectant cleaning materials and is scaling up production to keep up with the demand for many of its products as a result of the pandemic. Clorox recently stated in August that consumers will continue to see a shortage of its Clorox disinfecting wipes until 2021, which offers insight into just how fast the company’s cleaning products are flying off the shelves. With the flu and cold season coming up, Clorox could see another increase in sales that drives earnings growth.
Clorox is also a great consumer staple stocks thanks to its 2.09% dividend yield, reliable dividend growth history, and a diverse portfolio of brands. Its products will always experience stable demand even after the pandemic is over since household and personal care products are typically not affected by the economy or other risk factors. The company reported a 22% sales increase and a 28% diluted EPS increase in Q4 as it saw double-digit volume growth in all segments.
The J.M. Smucker Co
Another stock in the consumer staples sector that looks like a solid pick at this time is TheJM Smucker (NYSE:SJM). You’re likely already familiar with this company’s classic peanut butter and jelly brands, but there’s more to this company than just sandwiches. Along with its consumer foods products, The J.M. Smucker Company also has segments in U.S Retail Coffee and U.S. Retail Pet Foods that provide stable sales. With the shift to working from home, there’s a good chance that the company continues to see strong sales for its coffee segment that made up 28% of the company’s FY 2020 sales and includes iconic brands like Folgers, Dunkin’, and Cafe Bustelo.
Investors will also be attracted to the 3.32% dividend yield that The J.M. Smucker Co offers as well as 17 consecutive years of dividend growth. There’s also the fact that management recently raised its FY 21 EPS estimates to $8.20-$8.60 up from a prior $7.90-$8.30. While its safe to say that the company benefitted from consumer stockpiling at the onset of the pandemic, there are so many strong brands in the company’s portfolio that sales should remain steady for years to come. The stock is down over 7% this month which could provide long-term investors with a solid entry at this time.
Investing in one of the largest general merchandise retailers in the U.S. ahead of the holiday season could end up paying off in a big way. Target (NYSE:TGT) operates roughly 1800 stores across the U.S. and has seen strong sales growth throughout the pandemic as consumers continue to stock up on essential items at low prices. The company’s management has made intelligent strategic moves to create a fully integrated online business and same-day fulfillment services that are helping the company take market share away from major competitors like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).
After reporting quarterly earnings that blew estimates away in August, the stock has been consolidating and looks ready for another move to new highs. With a diverse set of products that includes both consumer staples and discretionary items, it wouldn’t be surprising at all to see Target continue to exceed earnings expectations in the coming quarters. This stock is also a dividend aristocrat with a 1.77% yield and the company has a very healthy balance sheet to continue rewarding long-term shareholders with dividend increases.