13 Best Consumer Staples Dividend Stocks to Buy Now

Published on November 9, 2022 at 11:21 am by Vardah Gill in Dividend Stocks, Hedge Funds, News

In this article, we will discuss 13 best consumer staples dividend stocks to buy now. You can skip our detailed analysis of the sector and its performance this year, and go directly to read 5 Best Consumer Staples Dividend Stocks to Buy Now.

The sizzling inflation and continuous interest rate hikes have taken nearly every sector into its fold this year. However, the consumer staples sector is performing better than the rest of the market because these companies exhibit strong demand for their products even during weak economic conditions. The growing demand gives the sector hedging capabilities against inflation, which makes investors pick these stocks over other risky industries. Some of the well-known names in the consumer staples sector include The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP).

Consumer staples companies benefitted a lot during the pandemic due to increased consumer spending, especially through digital channels. According to a report by JPMorgan, e-commerce represented 12% of gross sales in the first six months of 2020 and showed a 60% growth from the prior-year period (see the biggest e-commerce companies). The shift in the companies’ way of running businesses has further expanded the sector as people now have access to various online systems. This year’s returns have also shown that shares of the consumer staple companies have trounced their counterparts. The S&P 500 Consumer Staples index declined by 6.22% year-to-date, compared with a 29.6% drop in the S&P 500 Information Technology index. Another report by Fidelity Investments shows that the consumer staples sector delivered a 14% annualized return in the last three years ending March 2022, compared with an 11% and 13.2% return for the energy and industrial sectors.

Due to their non-cyclic nature, consumer staples have stable earnings, consistent cash flows, and strong balance sheets, which are very important from a dividend perspective. In the current market, investors prefer safe stocks that would help them to stay afloat and generate stable income. For this reason, we will discuss some of the best dividend stocks in the sector.

Our Methodology:

The stocks mentioned below are from the consumer staples sector and pay dividends to shareholders. We analyzed these stocks through their dividend policies, balance sheets, and overall fundamentals. The stocks are ranked according to their dividend yields as of November 8.

13. Costco Wholesale Corporation (NASDAQ:COST)

Dividend Yield as of November 8: 0.73%

Costco Wholesale Corporation (NASDAQ:COST) is an American multinational big-box store company. In October, Morgan Stanley raised its price target on the stock to $525 with an Overweight rating on the shares, appreciating the company’s unit growth and market share gains.

In fiscal Q4 2022, Costco Wholesale Corporation (NASDAQ:COST) reported revenue of $72 billion, which showed a 15% growth from the same period last year. The company ended the quarter with over $10.2 billion in cash and cash equivalents. Its total current assets amounted to over $32.6 billion, compared with $29.5 billion in the prior-year quarter.

Costco Wholesale Corporation (NASDAQ:COST) has been raising its dividends consistently for the past 18 years, which makes it one of the best dividend stocks in the consumer staples sector. It currently pays a quarterly dividend of $0.90 per share for a dividend yield of 0.73%, as of November 8.

At the end of Q2 2022, 64 hedge funds tracked by Insider Monkey owned stakes in Costco Wholesale Corporation (NASDAQ:COST), up from 61 in the preceding quarter. These stakes are collectively valued at over $4.76 billion. With stakes over $2 billion, Fisher Asset Management owned the largest position in the company in Q2.

In addition to The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP), investors are also paying attention to Costco Wholesale Corporation (NASDAQ:COST) due to its strong dividend policy.

Cooper Investors mentioned Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2022 investor letter. Here is what the firm has to say:

“The US economy continues to run hot – the labour market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.

In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…

…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”

12. Walmart Inc. (NYSE:WMT)

Dividend Yield as of November 8: 1.56%

Walmart Inc. (NYSE:WMT) is an American multinational retail company that operates a chain of hypermarkets and grocery stores. It is one of the best dividend stocks on our list as the company maintains a 49-year track record of consistent dividend growth. It currently pays a quarterly dividend of $0.56 per share and has a dividend yield of 1.56%, as of November 8.

Jefferies lifted its price target on Walmart Inc. (NYSE:WMT) in October to $165 with a Buy rating on the shares, calling the company a value leader in retail. The firm mentioned that the company is well-positioned to benefit in the current environment.

Walmart Inc. (NYSE:WMT) was a popular buy among elite funds in Q2 2022, as 67 hedge funds tracked by Insider Monkey owned positions in it, up from 60 a quarter earlier. The stakes owned by these hedge funds have a total value of over $3.78 billion.

Leaven Partners mentioned Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter. Here is what the firm has to say:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%^[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

11. Archer-Daniels-Midland Company (NYSE:ADM)

Dividend Yield as of November 8: 1.66%

Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based multinational food processing and commodities trading company. Baird lifted its price target on the stock to $98 in October with an Outperform rating on the shares. The firm highlighted the company’s underlying strong demand and management’s efforts through share repurchases and strategic acquisitions.

Archer-Daniels-Midland Company (NYSE:ADM) currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 1.66%, as recorded on November 8. The company has paid regular dividends to shareholders for 90 years in a row and has raised its payouts for consecutive 49 years. In Q3 2022, it paid $677 million to shareholders in dividends, which makes it one of the best dividend stocks to buy now.

At the end of Q2 2022, Archer-Daniels-Midland Company (NYSE:ADM) was a part of 42 hedge fund portfolios, the same as in the previous quarter, as per Insider Monkey’s data. The stakes owned by these hedge funds have a consolidated value of nearly $659 million.

Diamond Hill Capital mentioned Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter. Here is what the firm has to say:

“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”

10. The Hershey Company (NYSE:HSY)

Dividend Yield as of November 8: 1.78%

The Hershey Company (NYSE:HSY) is one of the world’s largest chocolate manufacturers that also specializes in other baked products. In Q3 2022, the company reported revenue of $2.73 billion, which showed a 15.7% growth from the same period last year. Its organic sales also grew by 11.8% during the quarter. At the end of October, the company had over $327.4 million available in cash and cash equivalents.

On November 4, The Hershey Company (NYSE:HSY) declared a quarterly dividend of $1.036 per share, in line with its previous dividend. The company has been paying regular dividends on its common stock for the past 372 quarters. Moreover, it has been raising its dividends consistently for the past 13 years, which makes it one of the best dividend stocks. As of November 8, the stock has a dividend yield of 1.78%.

Appreciating the company’s other exceptional quarter, Deutsche Bank raised its price target on The Hershey Company (NYSE:HSY) in November to $236 with a Hold rating on the shares.

At the end of Q2 2022, 43 hedge funds tracked by Insider Monkey owned stakes in The Hershey Company (NYSE:HSY), growing from 40 in the previous quarter. These stakes are collectively worth over $1.33 billion. Among these hedge funds, Renaissance Technologies was the company’s leading stakeholder in Q2.

9. Mondelez International, Inc. (NASDAQ:MDLZ)

Dividend Yield as of November 8: 2.39%

Mondelez International, Inc. (NASDAQ:MDLZ) is a multinational confectionery, food, and snack holding company, headquartered in Chicago, US. The company’s operating cash flow year-to-date came in at $2.5 billion and it generated over $1.9 billion in free cash flow during this period. Its cash generation was strong as it paid $800 million to shareholders in dividends during Q3 2022.

Mondelez International, Inc. (NASDAQ:MDLZ) currently pays a quarterly dividend of $0.385 per share for a dividend yield of 2.39%, as of November 8. The company has been raising its dividends consistently for the past eight years, which makes it one of the best dividend stocks in the consumer staples sector.

In November, Morgan Stanley raised its price target on Mondelez International, Inc. (NASDAQ:MDLZ) to $69 with an Overweight rating on the shares, following the company’s earnings beat in the recent quarter. The firm also appreciated the company’s strong organic sales growth.

At the end of Q2 2022, 48 hedge funds tracked by Insider Monkey owned stakes in Mondelez International, Inc. (NASDAQ:MDLZ), the same as in the previous quarter. The collective value of these stakes is over $1.78 billion. Two Sigma Advisors was the company’s leading stakeholder in Q2.

8. Colgate-Palmolive Company (NYSE:CL)

Dividend Yield as of November 8: 2.52%

Colgate-Palmolive Company (NYSE:CL) is a New York-based multinational consumer products company that specializes in healthcare, personal care, and other household products. In November, Barclays raised its price target on the stock to $76 with an Equal Weight rating on the shares, highlighting the company’s strong earnings in the recent quarter.

For the first nine months of the year, Colgate-Palmolive Company (NYSE:CL) reported an operating cash flow of over $1.88 billion. The company paid $1.2 billion in dividends to shareholders during the quarter, up from $1.1 billion paid during the same period last year.

On September 9, Colgate-Palmolive Company (NYSE:CL) declared a quarterly dividend of $0.47 per share, in line with its previous dividend. The company holds a 60-year streak of consistent dividend payments, which places it as one of the best dividend stocks on our list. Moreover, it has raised its payouts at a CAGR of 3.09% in the last five years. As of November 8, the stock has a dividend yield of 2.52%.

Colgate-Palmolive Company (NYSE:CL) was a popular stock among elite funds in Q2 2022, as 55 hedge funds in Insider Monkey’s database owned stakes in the stock, up from 50 a quarter earlier. These stakes have a total value of nearly $3 billion.

Third Point mentioned Colgate-Palmolive Company (NYSE:CL) in its recently-published Q3 2022 investor letter. Here is what the firm has to say:

“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.

Colgate has a strong portfolio of brands and operates across four categories that should perform well across most economic conditions: oral care, home care, personal care, and pet nutrition. Although Colgate has delivered organic sales growth of 5-6% over the past few years, earnings growth has been disappointing, and the stock has become a perennial underperformer. Foreign exchange headwinds have pressured reported results. Business reinvestment, supply chain disruption, and inflationary pressures have weighed heavily on margins; those headwinds are now reversing. Stepped up investments in demand generation, product innovation, and digital capabilities are starting to pay off. Global supply chain bottlenecks are easing and product availability on the shelf is improving. And, most importantly, raw material, transportation, and wage pressures are stabilizing, and even reversing in some areas, at the same time additional pricing takes effect. Taken together, the stage is set for Colgate to deliver several years of outsized earnings growth, as sales continue to increase, foreign exchange movements are annualized, and margins finally recover…” (Click here to view the full text)

7. PepsiCo, Inc. (NASDAQ:PEP)

Dividend Yield as of November 8: 2.53%

PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food, snack, and beverage company. It is one of the best dividend stocks on our list as it has raised its dividends for 50 years in a row. It currently offers $1.15 per share in quarterly dividends, with a dividend yield of 2.53%, as of November 8.

In the first nine months of the year, PepsiCo, Inc. (NASDAQ:PEP) reported an operating cash flow of $6.3 billion. The company’s cash and cash equivalents jumped to $6.4 billion during this period, from $5.6 billion nine months ago. Highlighting its shareholder commitment, the company expects to pay $7.7 billion to shareholders in FY22, including $6.2 billion in dividends.

Barclays raised its price target on PepsiCo, Inc. (NASDAQ:PEP) to $185 in October with an Overweight rating on the shares, appreciating the company’s flexibility in the current environment.

The number of hedge funds tracked by Insider Monkey owning stakes in PepsiCo, Inc. (NASDAQ:PEP) stood at 65 in Q2 2022, up from 62 in the previous quarter. The collective value of these stakes is over $5.28 billion. Among these hedge funds, Fundsmith LLP was the company’s largest stakeholder in Q2.

6. Target Corporation (NYSE:TGT)

Dividend Yield as of November 8: 2.64%

Target Corporation (NYSE:TGT) is a Minnesota-based big box department store chain. In October, Jefferies upgrade the stock to Buy and also lifted its price target on the stock to $185. The firm presented a bullish stance on the stock due to improvements in supply chain and inventory positioning.

Target Corporation (NYSE:TGT) has been paying regular dividends to shareholders since its IPO in 1967 and also maintains a 51-year track record of dividend growth. In the past five years, the company has raised its dividends at a CAGR of 14.96%, coming through as one of the best dividend stocks. It currently pays a quarterly dividend of $1.08 per share and has a dividend yield of 2.64%, as of November 8. The company is a good addition to dividend portfolios alongside The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP).

As per Insider Monkey’s Q2 2022 database, 46 hedge funds reported owning stakes in Target Corporation (NYSE:TGT), compared with 50 in the previous quarter. These stakes hold a combined value of over $1.2 billion.

Carillon Tower Advisers mentioned Target Corporation (NYSE:TGT) in its Q2 2022 investor letter. Here is what the firm has to say:

“Target Corporation (NYSE:TGT) faced its worst day in decades after trimming its profit forecast for the year due to higher costs. While many of the cost pressures are likely to persist in the near term, the company also struggled with a shift in consumer spending, which resulted in inventory write-downs.”

Click to continue reading and see 5 Best Consumer Staples Dividend Stocks to Buy Now.

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Published on September 27, 2024 at by Insider Monkey Staff

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