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Find Sunshine in a Dark Fiscal Overcast With These 3 Stocks

Following the Fed’s latest interest rate hike, stocks finished in the red in yesterday’s session.

The broad consensus of a 75-basis-point hike turned out to be accurate, although some were calling for a 100-basis-point hike.

Of course, during times of heightened volatility, investors should consider blending some stocks into their portfolios that provide a higher level of defense.

Three stocks from the Zacks Consumer Staples Sector – PepsiCo Inc. PEP, Altria Group, Inc. MO, and Campbell Soup Company CPB – would all provide investors with a defense-heavy approach.

Below is a chart illustrating the share performance of all three companies in 2022, with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

As we can see, all three stocks have weathered a dark fiscal cloud better than most.

Companies in the Zacks Consumer Staples Sector generate reliable, consistent revenue in the face of both good and bad economic times.

For the cherry on top, all three stocks are classified as low-beta, further shielding investors from the market’s volatility.

Let’s dive into each one.

PepsiCo, Inc.

PepsiCo is a long-established company engaged in the manufacturing, marketing, and distribution of grain-based snack foods, beverages, and other products.

Undoubtedly a major positive, the beverage titan’s earnings outlook has turned visibly bright over the last several months, helping land the stock into a favorable Zacks Rank #2 (Buy).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

It’s been a good year for the company; PepsiCo joined the elite Dividend King group earlier this year, displaying an exceptional commitment to shareholders.

The company’s annual dividend yields a notable 2.7% paired with a five-year annualized dividend growth rate of 6.7%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Further, PEP has a notably strong earnings track record, exceeding the Zacks Consensus EPS Estimate in nine of its last ten prints.

Top-line results have also been robust, with the company exceeding the Zacks Consensus Sales Estimate in 16 consecutive quarters.

Below is a chart illustrating the company's revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Altria Group, Inc.

Altria Group is a world-leading producer and marketer of cigarettes, tobacco, and other similarly related products.

MO’s dividend metrics would thrill any investor; Altria Group’s annual dividend yields a sizable 8.7%, nowhere near its Zacks Sector average of 2.8%.

In addition, the company has upped its dividend payout six times over the last five years with a notable 6.4% five-year annualized dividend growth rate.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

MO shares trade at rock-solid valuation levels – the company’s 8.9X forward earnings multiple resides nicely beneath its 10.9X five-year median and represents a steep 54% discount relative to its Zacks Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Altria also carries a favorable growth profile – earnings are forecasted to climb by 5.3% in FY22 and a further 5.2% in FY23.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Campbell Soup Company

With its subsidiaries, Campbell Soup is a worldwide manufacturer and marketer of high-quality, branded convenience food products.

Similar to PEP and MO, Campbell Soup carries enticing dividend metrics – CPB’s annual dividend yield sits at a strong 3.1%, nicely above its Zacks Sector average.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Further, shares trade at respectable valuation multiples, further displayed by its Value Style Score of a B. CPB’s 16.7X forward earnings multiple is well below 2020 highs of 20.9X and reflects a 14% discount relative to its Zacks sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company’s top line looks to remain strong – revenue is forecasted to climb 5% in FY22 and a marginal 0.4% in FY23.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

Blending extra defense into portfolios is something that all investors should consider in the historically-volatile year of 2022.

Companies within the Zacks Consumer Staples Sector can generate revenue in many economic situations, helping explain why some have held up so well.

In addition, they generally pay dividends, undoubtedly another major perk that all investors love.

To top it off, PepsiCo Inc. PEP, Altria Group, Inc. MO, and Campbell Soup Company CPB, all carry a beta of less than 1.0, further displaying their defensive nature.


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Altria Group, Inc. (MO) : Free Stock Analysis Report
 
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Campbell Soup Company (CPB) : Free Stock Analysis Report
 
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