General Mills, Inc. (GIS), Lorillard Inc. (LO): Is it Time to Rotate Out of Cyclicals and Into Staples?

General Mills, Inc. (NYSE:GIS) owns a myriad of leading brands that underpin the company’s reliable, steady business. These include Cheerios, Wheaties, Betty Crocker, Yoplait, and Progresso, among others. Investors should also find the stock’s better than 3% dividend attractive amid the current low interest rate environment.

Lorillard Inc. (NYSE:LO) – This cigarette manufacturer sells a number of discount brands, including Maverick and Kent, along with its flagship Newport brand of cigarettes. Although there may be some ethical considerations that go along with investing in cigarette companies, the sector has offered investors a terrific mix of growth and yield in recent years. Although Lorillard Inc. (NYSE:LO) has been underperforming the market over the last year, notching a loss of around 11%, the stock has been a long-term winner.

Investors will likely find the company’s track record of revenue growth and the stock’s better than 5% dividend yield very attractive. Valuation also appears reasonable as Lorillard Inc. (NYSE:LO) trades at a forward P/E ratio of roughly 12, which is less than both the S&P 500 and the cigarette industry as a whole. If volatility expectations continue to rise and the market downturn accelerates, don’t be surprised if Lorillard Inc. (NYSE:LO) actually rises on safe-haven flows.

Over the last 52-weeks shares are up almost 32%, including a roughly 9% gain in 2013. At current levels, the stock is trading at around 18 times next year’s earnings estimates. Given Unilever plc (ADR) (NYSE:UL)‘s high-quality defensive business and history of top-line growth, this valuation would appear fair. The stock also benefits from a generous 3% dividend yield, which should provide price support in the event of a market sell-off.

The overall outlook for the U.S. stock market continues to appear favorable, but frequently large corrections appear to be harmless at the outset. Although it is too early to determine if recent stock market gyrations and softening economic reports are the beginning of a larger downturn, investors who are sitting on large profits may want to adopt a more conservative posture.

One of the best places to look for companies that operate safe and reliable businesses and stocks that are offering large dividend yields is the consumer staples sector. Investors who are looking to rotate out of riskier equities and into high-yielding, less volatile names may find attractive opportunities in General Mills, Lorillard Inc. (NYSE:LO) and Unilever.

The article Is it Time to Rotate Out of Cyclicals and Into Staples? originally appeared on Fool.com is written by Ryan Glosier.

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