- Consumer staples are in demand regardless of economic phases, making them an enticing option for investor portfolios.
- Consumer staple stocks include food and beverage retailers and their value chain counterparts, along with other segments.
- Few good consumer staple stocks that grew despite the pandemic include WOW, MTS, ING, GNC, and EDV.
- A few stocks that have grown considerably despite the challenging environment include Woolworths Group, Metcash, and GrainCorp.
Daily use essentials are bought regardless of economic conditions. The demand for these consumer staples like food and beverages, household essentials, alcohol (adult staple) is almost constant. Consumer staples demand has stood firm even during pandemic peaks. People bought them online; in fact, people started hoarding these in their backyards in some places. The consumer staples sector, because of its nature, is, therefore, a preferred sector for investors, especially during recessionary phases. These stocks provide the needed stability to a portfolio in times of uncertainty.
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How can you Invest in consumer staples stocks?
The two most popular ways to invest in consumer staples are-
- Consumer Staple Stocks - buying shares of companies in the consumer staples value chain, or
- Consumer Staples ETFs - for taking exposure to not just one stock but the entire sector.
What should you look for in a consumer staples stock?
When investing in this sector stocks, the top 4 things that matter are-.
- History of the Company - ability to thrive in harsh economic conditions
- Dividend yield
- Consistent sales growth and
- A reasonable valuation
In light of these facts, let’s take a look at five exciting consumer staple stocks listed on ASX:
Metcash Limited (ASX:MTS)
Metcash provides marketing and operational support to independent local retailers (food, liquor & hardware). Operating since 1927, the Company has expanded its reach to around 90,000 wholesale and 10,000 retail distributors. Metcash claims to have the broadest retail distribution network in Australia.
For the year ended 30 April 2021, group sales rose 10.1%, and underlying hardware sales rose 24.7%. As a result, profit increased by 27.1% against last fiscal and EBIT grew 19.9% with solid volume.
On 23 July, MTS shares closed at AU$4.010, up 0.753%. The Company has been regularly paying dividends, and its current annual dividend yield is 4.36%. MTS’s 52-week return is 45.818.
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Woolworths Group Limited (ASX:WOW)
Woolworths Group is Australia's oldest homegrown retail chain giant. It owns supermarkets, marts, liquor shops, and hotels. Woolworths Group's third-quarter sales were up 0.4% compared to Q3 FY20. However, Group e-commerce sales grew significantly, up 64.2% vs Q3 F20.
On 1 July 2021, WOW demerged its drinks business, Endeavour Group.
On 23 July, WOW shares closed at AU$39.520, up 0.893%. The Company has been regularly paying dividends since 2011, and its current annual dividend yield is 2.25%. WOW’s 52-week return is 15.860%.
Also Read: How can you invest in Woolworths shares?
GrainCorp Limited (ASX:GNC)
GrainCorp provides grain storage, handling, freight, and marketing services on Australia's east coast. For more than 100 years, it has been connecting Australian producers to domestic and international customers. GNC has a market capitalization of 1.19 billion on the ASX.
GNC also reported a solid first-half FY21 performance, with impressive growth in Underlying EBITDA and earnings in both Agribusiness and Processing segments.
On 13 May 2021, GNC announced a half-yearly, fully franked dividend of 8 cents per share. The current annual dividend yield stands at 2.79%.
On 23 July, GNC shares closed at AU$5.360, up 0.374%. GNC’s 52-week return is 38.501%.
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Inghams Group Limited (ASX:ING)
Ingham Group is a poultry producer from Sydney. It claims to have an unrivaled network of processing and distribution facilities across Australia and New Zealand. Listed on the ASX since 2013, ING has a market cap of AU$1.44 billion.
ING pays regular dividends, with the last dividend of 7.5 cents per share was declared in April 2021. ING shares have given a 6.9% average dividend yield in the last five years.
In its FY21 earnings guidance, Ingham reported that it expects statutory EBITDA in the range of AU$438 - AU$448 Million and statutory NPAT (post AASB16) between AU$80- AU$87 Million. The Company also anticipates these stats to exceed the consensus provided.
On 23 July, ING shares closed at AU$3.910, up 0.256%. ING’s 52-week return is 20.308%.
Endeavour Group Limited (ASX:EDV)
Owner of the Dan Murphy's and BWS stores, Endeavour Group has the nation's most extensive portfolio of licensed hospitality venues. EDV demerged from the Woolworths group recently. The Company team is supported by the Pinnacle Drinks brand and manufacturing business.
EDV shares started trading on ASX on 24 June 2021 and have gone up 34 cents per share since then. Woolworths is still a substantial shareholder in EDV with 14.6% shares. Other prominent shareholders are J P Morgan Nominees Australia Pty Limited and HSBC Custody Nominees (Australia) Limited. EDV continues the legacy of Woolworths' drinks and hotel business. Its shares trade on ASX at AU$6.36 as of 20 July 2021.
EDV shares started trading on 24 June 2021 at AU$6.440 and have gone up 42 cents since then.