The consumer staples sector of the stock market -- made up of companies that make products like food and drink, tobacco and alcohol, and household and personal items -- doesn't put up big growth numbers like other areas of sectors. An investment in consumer staples stocks is still worth considering, though, as the companies behind these stocks can post good numbers in a good year and are historically stable in a bad year.

Why buy consumer staples stocks?

As the name implies, companies that fall under the "staples" category produce and sell products that are deemed essential. As such, sales tend to be stable, devoid of many of the ups and downs that consumer discretionary companies have. Think of your local grocery store versus your favorite place to eat out. In tough times you'll likely continue buying from the grocery store, but scale back on your restaurant budget.

A young couple moving boxes into a new home

Companies in the consumer staples universe produce basic items that we all use every day. Image source: Getty Images.

Because of the resulting stability of sales, consumer staples stocks have historically fared better during downturns than the market overall. For example, compare the performance of the sector, as measured by the Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP), to that of the S&P 500 from October 2007 to the end of 2009:

XLP Total Return Price Chart

Data by YCharts.

Owning companies that provide the basics has obvious appeal to investors who want to offset market volatility, but that doesn't mean there's no growth to be had. Consumer staples companies may have boring business operations, but share values can still rise: Companies can control costs, and gain market share by differentiating their products and customer experiences. Many U.S. companies also sell to emerging economies around the world, and are getting a boost to growth that way.

How to invest in consumer staples companies

There are hundreds of stocks to choose from in the consumer staples universe. Choosing individual ones can be a daunting task, but ETFs (exchange-traded funds) can help solve the problem. Here are three of the largest ETFs that track the U.S. consumer staples sector:

ETF

Total Net Assets

Annual Expense Ratio

Dividend Yield

Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP)

$8.9 billion

0.14%

2.70%

Vanguard Consumer Staples ETF (NYSEMKT:VDC)

$4.5 billion

0.10%

2.52%

iShares Dow Jones U.S. Consumer Goods ETF (NYSEMKT:IYK)

$647 million

0.44%

2.02%

Data sources: State Street Global Advisors, Vanguard, and iShares.

All three ETFs have substantial overlap in underlying stock holdings, and therefore have had similar performance over the last 10 years. A small note is that the iShares fund excludes service companies, some of which are retailers like Wal-Mart Stores (NYSE: WMT), and includes some consumer discretionary stocks like automakers and video game makers. As a result, while its performance is close to its peers, it can have bigger swings in value to the upside and downside. Check out this chart.

XLP Total Return Price Chart

Data by YCharts.

Whichever ETF investors chose, though, the stability of staples would have helped them beat the S&P 500 by a hefty margin over the last 10 years.

If investing in individual companies is your thing, here's a list of some of the biggest consumer staples companies to start your research. Notice the brand recognition here, the proverbial "investing in what you know." These businesses are big, many of them are very old, and they're well-entrenched in our everyday lives:

Company

Market Cap

Price-to-Earnings Ratio (TTM)

Dividend Yield

Johnson & Johnson 

$348 billion

22.0

2.48%

Wal-Mart Stores

$237 billion

19.0

2.55%

Procter & Gamble 

$231 billion

16.2

2.98%

Anheuser-Busch InBev 

$224 billion 58.5 3.33%

Coca-Cola Company 

$192 billion

47.4

3.26%

Philip Morris International 

$174 billion

24.8

3.79%

PepsiCo 

$158 billion

23.5

2.85%

Altria Group 

$123 billion

8.5

4.29%

Kraft Heinz Company 

$95 billion

25.1

3.16%

Walgreens Boots Alliance 

$83 billion

19.6

2.05%

CVS Health

$82 billion

16.1

2.51%

Costco Wholesale 

$72 billion

28.5

1.24%

Colgate-Palmolive 

$64 billion

26.9

2.24%

Mondelez International 

$61 billion

35.6

2.19%

Constellation Brands 

$39 billion

25.1

1.03%

TTM = trailing-12-month. Data source: Yahoo! Finance.

The names listed -- general discount retailers, food and drink companies, makers of personal items --  offer basics that we all use and sport attractive dividend payouts. Even in an economic downturn, many of these businesses could easily weather the storm, or could get a boost when consumers start looking for products and services that might save them money.

If you're worried about big swings in the value of your investment portfolio, adding a few funds or companies like the ones above could add stability without sacrificing long-term returns.

Nicholas Rossolillo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and Johnson & Johnson. The Motley Fool recommends Costco Wholesale, CVS Health, and PepsiCo. The Motley Fool has a disclosure policy.