From tissue paper to toothpaste, these consumer goods are about as dependable as it gets in our volatile world, and right now, that’s what investors need.
Aug. 15, 2020
As we move into the second half of 2020, the COVID-19 pandemic continues to generate new fears and concerns almost by the week, with even basic questions about the future of the global economic, political, and social fabric going unanswered.
Under such conditions, investors would do well to turn to companies with a robust record of surviving and even thriving in the face of history’s other great crises. The consumer staples sector may lack the glamour of Big Tech or mass media, for instance, and in some ways that’s the point. No matter what lies ahead for the business environment in the U.S. and beyond, people will always need to keep their fridges stocked and their bellies full.
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1. Procter & Gamble
Wherever you happen to live, chances are your home contains at least one of Procter & Gamble’s (NYSE:PG) enormous range of products. Few companies can boast of having such an array of instantly recognizable brands: Gillette razors, Febreze spray, Pampers diapers, Oral-B toothpaste, Head & Shoulders shampoo, and many others.
P&G’s dominant position in the consumer products industry is matched by an exceptional balance sheet. The company has a pretty consistent record of beating analyst estimates — a record that was kept up in April when the company saw a 10% jump in sales, mostly attributable to the rise in so-called ‘panic buying’ that arose in the early weeks of the pandemic. The comical, Dutch tulip-like obsession with toilet paper back in the spring already feels like a lifetime ago, but the phenomenon is no doubt fondly remembered by the accounting department at P&G, which owns literally a dozen major toilet paper and tissue brands.
In its most recent earnings report, Procter & Gamble continued to defy 2020’s gloomy economic expectations. A 4% rise in overall net sales was driven by the success of the firm’s household cleaning segment. The sudden shift to widespread remote working is often talked about in terms of transport and technology, but P&G is profiting by an underappreciated feature of this phenomenon — the extra housekeeping demands that arise when one’s home becomes, if only temporarily, one’s office.
2. Dollar General
An old-fashioned American success-story, Dollar General (NYSE:DG) was founded in 1939 by two enterprising Kentucky natives, J.L Turner and his son Cal. In the years since, Dollar General has become, in its own words, “America’s neighborhood general store”. The company operates more than 16,000 stores across almost every state, where its emphasis on deals and discounts has proven particularly popular in rural and low-income communities.
Dollar General’s offering is dominated by the consumer staples category, which accounts for about four-fifths of its sales. As might be expected, the coronavirus crisis has hugely increased demand in this area, with same store sales jumping a whopping 21.7% in the quarter ended May. This spike in popularity is reflected in the company’s commitment to new hires: according to CEO Todd Vasos, Dollar General has hired an additional 50,000 staff since March of 2020, almost doubling its workforce.
For investors, Dollar General is an attractive stock even disregarding its recent, pandemic-induced success. With decades of consistent growth behind it, the company is known for its healthy cash flow and generous dividends. First announced in 2015, these dividends have increased year-on-year since then. In 2019, the company paid out $328 million in dividends and looks to more than match that by the end of this year.
3. Kimberly Clark
Specializing in paper-based consumer products, The Kimberly Clark Corporation (NYSE: KMB) can boast of having the world’s best-known tissue paper brand, Kleenex, among its offerings. While others were making jokes about the toilet paper craze earlier this year, Kimberly Clark was profiting, with a 13% rise in year-on-year sales in its paper segment showing up in May’s earnings report.
Shares of Kimberly Clark have stayed relatively flat throughout the year despite several quarterly successes. In a period of extended volatility, however, this may provide investors with a degree of reassurance. On top of its steady performance, Kimberly Clark offers investors an appealing dividend currently yielding about 3%.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold no positions in companies mentioned above. Read our full disclosure policy here.