Coca-Cola (KO +0.28%) is a famous company with an iconic brand known the world over. Operating in the consumer staples space, consumers tend to keep buying its products right through periods of stock market and economic turmoil. That's how Coca-Cola has managed to support and grow its dividend through the years despite often material headwinds.
While Coca-Cola is an elite company, it is far from the only consumer staples maker that can help you rest easy amid stock market unrest. Here are a few others.
Why consumer staples companies are a safe haven investment
If the stock market falls into a bear market are you going to stop buying toothpaste, toilet paper, and soda? If the economy succumbs to a recession, will you stop using soap, laundry detergent, and food? That answer, I hope, to those two questions is no. And this is why consumer staples makers are so attractive during troubled times (if not all the time).
Image source: Getty Images.
Many of the products that companies like Coca-Cola sell aren't actually necessities. In this case you could just drink tap water instead of soda. However, the cost of most consumer staples products is fairly modest while the benefits are material, even if those benefits are really just emotional. Brand loyalty tends to run high in the consumer staples niche. Even better, consumer staples products are bought frequently because they get used regularly.
If you are having trouble sleeping at night amid market uncertainty, you should consider adding some more consumer staples stocks to your portfolio mix.
NYSE: KO
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Some options in the consumer staples arena
Coca-Cola is a solid choice for highly conservative investors. It has an above-market dividend yield of 2.9% backed by a dividend that has been increased annually for more than 50 years, making this beverage giant a Dividend King. The company has a global distribution network, strong R&D skills, and massive marketing heft. The only problem is that the stock looks a little expensive right now, with its price-to-sales and price-to-earnings ratios both above their five-year averages. If you're willing to pay up for safety, you might want to buy Coca-Cola.
NASDAQ: PEP
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But beverage peer PepsiCo (PEP +0.67%) has similar business strengths and a more diversified portfolio that includes snacks and packaged foods. It is also a Dividend King. However, the real attraction lies in its valuation, with PepsiCo's P/S and P/E ratios both below their five-year averages. Its dividend yield is an even higher 3.7%. And with PepsiCo investing in growth through bolt-on acquisitions, it is continuing to grow its business with the same playbook that has worked well for more than five decades.
NYSE: UL
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That said, you might want something a little different. Unilever (UL 0.62%) could be just what you are looking for, with its portfolio of consumer products and food. The big story with Unilever is that North America and Europe only make up around 40% of its top line, with the rest coming from Latin America and Asia, where economic growth is expected to be higher over the long term. Add in a 3.1% dividend yield and this is an attractive consumer staples option for those with a more adventurous bent.
NYSE: MO
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Then there are ultra high yielders like Altria (MO +0.34%) and British American Tobacco (BTI +0.07%). Both of these cigarette makers are facing material long-term headwinds as the volume of the cigarettes they sell has been in decline for years. However, smokers tend to be very loyal and often increase their use of cigarettes during uncertain times. During the coronavirus pandemic, both Altria and British American Tobacco put up their strongest volume numbers in years.
NYSE: BTI
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While these two tobacco companies come with material long-term risks, the short-term benefit of collecting Altria's 7.2% yield and British American Tobacco's 7.5% yield might be worth it for some investors. Given the nature of cigarettes, those lofty yields are likely to be safe over the near term.
There are plenty of options in the consumer staples space
Although all of the companies listed here are attractive in their own way, the list is hardly exhaustive. There are many more consumer staples stocks that are worth looking at if you are worried about the market and fear a recession. While there is no way to fully avoid the impact of either of these big-picture events, buying companies like Coca-Cola, PepsiCo, Unilever, Altria, and British American Tobacco can help ease your worries and let you rest a little better thanks to their reliable businesses and dividends.
