Consumer staples stocks offer a lot for income investors. They aren’t flashy, they don’t grow robustly, but their blue-chip businesses are entrenched and produce cash flow that stands the test of time. More importantly, the consumer staples group provides a substantial capital return, often including share buybacks and robust dividends. The dividends are what counts. Stocks like Hormel (NYSE: HRL) and Campbell Soup Company (NASDAQ: CPB) pay consistent dividends with an outlook for distribution growth that helps to drive their stock prices higher over time.
Today’s takeaway is that Hormel and Campbell offer significant buying opportunities for investors. The stocks are trading at long-term, multi-year lows and the low ends of their valuation range. Hormel is trading at a 25% discount and Campbell at 22%, with yields at the high end of their ranges. Each yields more than 3% in late 2024, well above their long-term averages and 3x the broad-market average. It may take time for market cyclicality to drive these stocks back to the high ends of their P/E ranges, but the move is likely, and it will generate high double-digit total returns for investors with the time and foresight to wait.
