Consumer Staples A Must-Own Amid A New Administration

From Marshall Hargrave: A new president for the next four years can create some uncertainty. If you look back over the last 180 years or so and the numerous presidential elections, it turns out that recessions and bear markets tend to start in the first two year’s of a president’s term.

And yet the one certainty is that we’ll still be buying necessities like soap and cleaning supplies in 2017. Consumer staples stocks will remain great companies amidst a transitional year. Here are the top three consumer staples stocks as the new administration takes its place.

Consumer Staples: Kimberly Clark (NYSE:KMB)

Kimberly Clark is one of the more underrated names in the consumer staples space. Shares have fallen over 11% in just the last three months. Its dividend yield is up to 3.2%, and it’s upped its dividend for 42 straight years. But a weak quarter has punished shares.

However, the key for Kimberly Clark is that it’s looking to restructure costs to save money going forward. That way, it’ll have more money to invest in growth opportunities, such as acquisitions and product development.

Consumer Staples: Colgate Palmolive (NYSE:CL)

Colgate Palmolive’s 2.2% dividend yield isn’t as hefty as some of the bigger names in the consumer staples space, but its 52-year streak of consecutive dividend increases is unrivaled. The biggest advantage that Colgate Palmolive has over other major players is that it has a lot of exposure to faster growing emerging markets.

Over half of its revenues are from emerging markets. And sales should only keep growing in these areas as oral care starts to catch on. Once that happens, Colgate will see not only higher sales but also more consistent cash flow as many of its oral care products are repetitive purchases for customers.

Consumer Staples: Unilever (NYSE:UL)

Unilever is another consumer staples stock that’s taken it on the chin, now trading at an attractive valuation. Shares have fallen nearly 10% in the last month. Its 3.4% dividend yield has helped soften the blow, but shares are now trading at less than 20 times next year’s earnings estimates.

However, Unilever isn’t sitting around hoping it’s products find new growth avenues. Instead, it’s out searching for growth — making two major acquisitions recently. It bought Dollar Shave Club and Seventh Generations, two smaller but much-faster-growing companies. Both companies give Unilever access to an entirely new sales channel and access to a new faster-growing product categories.

Despite the continued uncertainty of what a new president will bring in 2017, shoppers will still be buying toothpaste, toilet paper and shampoo. The three companies above are some of the best providers of those and other consumer staples products. These companies are safe bets in an increasingly uncertain market.

On the ETF side of things, diversified consumer staples exposure can best be found in the XLP. The Consumer Staples Select Sect. SPDR ETF (NYSE:XLP) was unchanged in premarket trading Wednesday. Year-to-date, XLP has gained 1.04%, versus a 1.22% rise in the benchmark S&P 500 index during the same period.

XLP currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #24 of 46 ETFs in the Consumer-Focused ETFs category.


This article is brought to you courtesy of Wyatt Investment Research.