4 Top Consumer Staples Stocks to Buy in January

With markets experiencing immense volatility of late, and with a potential market correction on the horizon, investors are now seeking shelter with fundamentally sound, dividend-paying consumer staples stocks to secure their portfolios. Growing investor optimism in this sector is evidenced by the Consumer Staples Select Sector SPDR ETF’s (XLP) 6.3% gains over the past month, which have surpassed the SPDR S&P 500 Trust ETF’s (SPY) 3.9% returns.

Despite inflationary pressures, supply chain constraints, and surging COVID-19 cases, the launch of new products to keep pace with changing consumer tastes has enabled defensive consumer staples companies to expand their market reach. Moreover, these companies have capitalized on rising consumer spending this holiday season to boost their profit margins substantially.

Given this backdrop, we believe prominent industry leaders The Coca-Cola Company (KO), Colgate-Palmolive Company (CL), Sysco Corporation (SYY), and Archer-Daniels-Midland Company (ADM) are poised to grow substantially. Also, their expanded market reach and stable financials make them well-positioned to deliver significant returns in the coming months, while dodging the market’s short-term fluctuations.

The Coca-Cola Company (KO)

KO in Atlanta, Ga., owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, energy drinks, dairy, and syrups to fountain retailers such as restaurants and convenience stores. It operates through independent bottling partners; distributors; wholesalers; retailers; and bottling and distribution operators.

KO has paid a  $0.42 per common share quarterly cash dividend on Dec. 15. The stock pays a $1.68 per share dividend annually, translating into a 2.85% yield. The company’s dividend has grown at a 3.71% rate over the past five years.

In a Nov. 1 announcement, KO said it acquired full ownership of Bodyarmor SuperDrink, a line of sports and hydration beverages, for $5.6 billion in cash. Since 2018, BODYARMOR has been a great addition to KO’s system lineup and has driven continuous innovation in hydration and health-and-wellness products. KO is looking forward to executing BODYARMOR’s 2022 plan and working on its vision and strategy for 2023 and beyond.

For its fiscal third quarter, ended October 1, 2021, KO’s non-GAAP net operating revenues increased 16.1% year-over-year to $10.05 billion. The company’s non-GAAP gross profit came in at $6.14 billion, representing a 19.4% rise from the prior-year period. KO’s $3.01 billion non-GAAP operating income for the quarter represents a 14.6% rise from the year-ago period. While its non-GAAP net income increased 18.2% year-over-year to $2.82 billion, its non-GAAP EPS increased 18.2% to $0.65. As of October 1, 2021, the company had $11.30 billion in cash and cash equivalents.

Analysts expect the company’s EPS to increase 17.4% year-over-year to $2.29 in the current year. A $38.12 billion consensus revenue estimate for the current year represents a 15.5% rise from the prior-year period. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. KO’s EPS is expected to grow at a 9.7% rate per annum over the next five years. The stock has gained 9.6% over the past month and closed yesterday’s trading session at $58.88.

KO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Quality, and a B grade for Stability. Click here to see the additional ratings for KO’s Sentiment, Value, Growth, and Momentum. KO is ranked #11 of 35 stocks in the B-rated Beverages industry.

Colgate-Palmolive Company (CL)

CL sells consumer products manufactured under its oral, personal, home care, and pet nutrition segments. The New York City-based company markets and sells its products to various retailers, wholesalers, e-commerce, and distributors.

CL paid a $0.45 quarterly cash dividend on Nov.15. The stock pays a $1.80 per share dividend annually, translating into a 2.13% yield. The company’s dividend has grown at a 2.92% rate over the past five years.

On August 6, CL announced a strategic collaboration with Verily Life Sciences, an Alphabet Inc. (GOOGL) subsidiary that is focused on life sciences and healthcare, to conduct advanced oral health research as part of Verily’s ongoing Baseline Health Study to improve the understanding of connections between oral health and overall health. The effort marks CL’s commitment to accelerating and improving clinical research through the smart use of data, creative collaboration, and unrivaled technical capabilities.

CL’s net sales for its fiscal third quarter, ended September 30, 2021, increased 6.3% year-over-year to $4.41 billion. The company’s gross profit came in at $2.62 billion for the quarter, representing a 3.3% rise from the prior-year period. CL’s non-GAAP operating profit was $967 million, down 3.5% from the prior-year period. While its non-GAAP net income increased marginally year-over-year to $689 million, its EPS increased 2.5% to $0.81. The company had $958 million in cash and equivalents as of September 30, 2021.

A $3.21 consensus EPS estimate for the current year represents an 8.2% rise from the prior-year period. NOC surpassed the consensus EPS estimates in each of the trailing four quarters. The $17.47 billion consensus revenue estimate for the current year indicates a 6.1% year-over-year improvement. Analysts expect the company’s EPS to grow at a 6.1% rate per annum over the next five years. Over the past month, the stock has gained 9.6% in price and ended yesterday’s trading session at $84.46.

It is no surprise that CL has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Stability. Click here to see the additional ratings for CL (Growth, Value, Momentum, and Sentiment). The stock is ranked #13 of 68 stocks in the Consumer Goods industry.

Sysco Corporation (SYY)

Houston, Tex.-based SYY markets and distributes a range of food and related products primarily to restaurants, healthcare, and educational facilities. The company also distributes personal care guest amenities, housekeeping supplies, room accessories, and textiles to the lodging industry.

SYY is scheduled to pay a $0.47 quarterly cash dividend on Jan. 28, 2022. The stock pays a $1.88 per share dividend annually, translating into a 2.40% yield. The company’s dividend has grown at an 8.21% rate over the past five years.

On December 6, SYY agreed to acquire The Coastal Companies, a leading fresh produce distributor and value-added processor, from the food and agribusiness investment company Continental Grain Company. The Coastal Companies will operate as part of SYY’s FreshPoint specialty produce business, and help SYY expand FreshPoint’s market reach, diversify its portfolio by adding retail and ready-to-eat capabilities and provide significant value-added manufacturing capabilities.

For its fiscal third quarter, ended Oct. 2, SYY’s sales increased 39.7% year-over-year to $16.46 billion. The company’s gross profit came in at $2.97 billion, up 33.9% from the prior-year period. Its non-GAAP operating earnings were $685.06 million for the quarter, indicating an 87.9% year-over-year improvement. Its  $429.92 million in non-GAAP net earnings represent a 147.9% rise from the prior year. Its non-GAAP EPS came in at $0.83, up 144.1% from the year-ago period, and it had $2.07 billion in cash and equivalents as of October 2, 2021.

Analysts expect the company’s EPS to be $3.45 for the current year, representing a 139.6% rise from the prior-year period. A $64.93 billion consensus revenue estimate  for the current year indicates a 26.6% year-over-year improvement. SYY’s EPS is expected to grow at a rate of 54.2% per annum over the next five years. The stock has gained 7.7% in price over the past month and closed yesterday’s trading session at $78.32.

SYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a B grade for Growth, Value, and Quality. Click here to see the additional ratings for SYY’s Momentum, Stability, and Sentiment. SYY is ranked #14 of 83 stocks in the Food Makers industry.

Archer-Daniels-Midland Company (ADM)

Chicago-based ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients internationally. The company operates through three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition. It also offers futures commission merchant and insurance services.

ADM paid a $0.37 quarterly cash dividend on Dec. 8. The stock pays a $1.48 per share dividend annually, translating into a 2.21% yield. The company’s dividend has grown at a 4.28% rate over the past five years.

On December 22, ADM acquired Flavor Infusion International, S.A. (FISA), a full-range provider of flavor and specialty ingredient solutions for customers. ADM and FISA are looking forward to benefiting from the growing nutrition segment and flavors business across Latin America and the Caribbean, and from solutions from two state-of-the-art manufacturing facilities in Panama and Colombia.

ADM’s revenues for its fiscal third quarter, ended September 30, 2021, increased 34.5% year-over-year to $20.34 billion. The company’s gross profit came in at $1.33 billion for the quarter, representing a 27.3% year-over-year improvement. ADM’s adjusted segment operating profit was $1 billion, indicating an 18% rise from the prior-year period. Its adjusted net earnings came in at $548 million, up 9.8% from the prior-year period. And its adjusted EPS increased 9% year-over-year to $0.97. The company had $1.08 billion in cash and cash equivalents as of September 30, 2021.

The $4.89 consensus EPS estimate for the current year represents a 36.2% rise from the prior-year period. For the current year, analysts expect ADM’s revenue to improve 28.4% from the prior-year period to $82.61 billion. It surpassed Street’s EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at a 10% rate per annum over the next five years. Over the past month, the stock has gained 3.9% in price and closed yesterday’s trading session at $66.93.

ADM’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. ADM has a B grade for Value and Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ADM’s Growth, Stability, Momentum, and Quality here. ADM is ranked #1 of 30 stocks in the Agriculture industry.

KO shares were trading at $58.95 per share on Wednesday afternoon, up $0.07 (+0.12%). Year-to-date, KO has gained 10.88%, versus a 29.12% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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