Inflationary pressure remains stubbornly high in the United States lately, thanks to a rise in fuel prices. Therefore, investors must closely watch consumer staples stocks such as Mondelez International MDLZ, Hershey HSY and McCormick & Company MKC as they provide a natural hedge against inflation.
Consumer Price Still Running Hot
Prices of indispensable goods and services continue to move northward. For August, the consumer price index (CPI) advanced 0.6% month over month and registered its biggest monthly increase in 14 months, per the Labor Department. The CPI climbed 3.7% last month from a year ago.
The core CPI also advanced both on a monthly and yearly basis in August. In reality, increases in consumer prices were broad-based as the current rise in oil prices across the globe perked up price pressures. Robust demand for oil amid tighter supply pushed oil prices to this year’s highest level.
The cost of food, shelter, gasoline and airfares increased in August. Additionally, the cost of home furnishing, auto insurance, trucks and cars rose last month.
Wholesale Price Scale Northward
The recent report on wholesale inflation is similar to consumer prices in August. The producer price index (PPI) increased 0.7% month over month in August and notched its biggest monthly gain in 14 months. The PPI increased 1.6% in August over the past 12 months.
The so-called core PPI that generally strips out the volatile energy and food costs also edged up monthly and yearly last month. Nonetheless, wholesale prices that tend to indicate future inflation trends advanced in August, fueled by higher energy costs.
Consumer Staples Stocks Act as a Protection Against Inflation
Elevated oil prices leading to a rise in inflation decreases the purchasing power of your dollars. This leads to a drop in consumer outlays, which impacts economic growth and spurs volatility in the stock market.
However, investors shouldn’t stay away from investing in stocks. Instead, they should bet on companies that are unperturbed by price pressures and their adverse effects on the stock market.
Such stocks belong to the consumer staples sector. Consumers may be compelled to cut back on discretionary spending but must purchase staple products. These products are cyclical, and their demand is constant irrespective of market upheavals.
Keep an Eye on These 3 Consumer Staples Stocks
We have, therefore, highlighted three inflation-proof consumer staples stocks that astute investors should keep a tab on. These stocks have paid dividends steadily, indicating a solid business model. Presently, these stocks have a Zacks Rank #3 (Hold).
Mondelez International is one of the leading global snacks company. The Zacks Consensus Estimate for its current-year earnings has increased 1.6% over the past 60 days. The company’s expected earnings growth for the current year is 9.8%.
It has a dividend yield of 2.1%. In the past five-year period, MDLZ has increased its dividend six times, and its payout has advanced by 10%. MDLZ’s payout ratio presently sits at 49% of earnings. Check Mondelez International’s dividend history here.
Hershey is the largest chocolate manufacturer in North America. In addition, Hershey manufactures pantry items like baking ingredients, toppings, and beverages; and gum and mint refreshment products. The Zacks Consensus Estimate for its current-year earnings has increased 0.7% over the past 60 days. The company’s expected earnings growth for the current year is 12.1%.
It has a dividend yield of 2.3%. In the past five-year period, HSY has increased its dividend five times, and its payout has advanced by 8.8%. HSY’s payout ratio presently sits at 45% of earnings. Check Hershey’s dividend history here.
McCormick & Company is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry. The Zacks Consensus Estimate for its current-year earnings has increased 1.5% over the past 90 days. The company’s expected earnings growth for the current year is 5.1%.
It has a dividend yield of nearly 2%. In the past five-year period, MKC has increased its dividend five times, and its payout has advanced by almost 9%. MKC’s payout ratio presently sits at 60% of earnings. Check McCormick & Company’s dividend history here.
Hershey Company (The) (HSY): Free Stock Analysis Report
McCormick & Company, Incorporated (MKC): Free Stock Analysis Report
Mondelez International, Inc. (MDLZ): Free Stock Analysis Report
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