Stocks to Hold in a Recession: Kraft Heinz, Walgreens, and 3 Other Staples

In these tough economic times, consumer staple stocks make sense to hold, especially during periods of economic hardship, but the sector isn't particularly cheap at the moment.

‍

Thus, Trade Algo identifies five consumer staple companies that sell at attractive prices and are expected to deliver both downside protection while also offering dependable returns to investors.

‍

As a result of the sector's slow performance this year, it is still trading at a slightly higher premium than the broader market. As of right now, the Consumer Staples Select Sector SPDR Fund XLP +0.58% (ticker: XLP) is trading at about 20 times this year's profit estimates, while the SPDR S&P 500 ETF Trust (SPY) is trading at nearly 19 times the profit estimates for this year.

‍

In constructing this screen,  Trade Algo looked for stocks in the S&P 500 that were in the consumer staples sector and had a price-earnings ratio of under 15 (based on this year's profit estimates from FactSet), as well as a yield of at least 3%.

‍

According to the screen, the five companies are Altria Group (MO), Walgreens WBA +1.38% Boots Alliance (WBA), Kraft Heinz KHC +1.46% (KHC), Conagra Brands (CAG) and Molson Coors Beverage TAP +0.69% (TAP).

‍

The Safety of Staples

‍

Aside from their attractive valuations and yields of 3% or more, these five consumer staples companies are all members of the S&P 500.

‍

• Altria Group

‍

• Walgreens Boots Alliance

‍

• Kraft Heinz

‍

• Conagra Brands

‍

• Molson Coors Beverage

‍

Among the stocks in this screen, Altria Group, which produces Marlboro cigarettes, yields the highest at 8.4%, coming in as the highest-yielding stock.

‍

With such a high yield, it is easy for shareholders to be concerned about the safety of the dividend, yet this company is facing secular declines in its cigarette volumes at the moment. There is a transition being made by the company to smokeless products in order to save money.

‍

According to reporting by  Trade Algo, the company's CEO, Billy Gifford, recently stated that maintaining the dividend is of utmost importance in order to maintain shareholder value.

‍

In his words, "It is an issue that is of prime importance to investors and to us."

‍

There has been a slight decline in the stock this year, including dividends, of approximately 0.7%.

‍

There is a 5.4% yield associated with Walgreens Boots Alliance, and the stock has returned about minus 3% in the current year. However, there are some signs that show the right direction is being taken as things are moving forward.

‍

As a result of the company's most recent quarterly earnings, the company has posted a profit of $1.16 per share. Despite the company's profit being below the $1.59 per share it earned a year earlier, the company's profit for the quarter was only a few cents above it was expected to be.

‍

It is encouraging that the company's dividend rate is among the best of the 500 Dividend Aristocrats Index, a measure that impresses me about the company's dividends. The 67 members of the stock have paid out at least 25 consecutive years of higher dividends to their shareholders.

‍

With its 47 consecutive years of dividend increases, Walgreens Boots Alliance, a company that provides health care and operates retail pharmacies, has become a leader in the industry.

‍

The dividend growth record of Kraft Heinz, however, doesn't have the same level of reliability as that of other companies. Moreover, as part of a restructuring plan aimed at improving the company's balance sheet, the payout was slashed in 2019.

‍

A recent investor presentation by the company stated that it does intend to maintain its dividend while continuing to invest in the business at the same time.

‍

There has been no change in the dividend for the quarter, which has remained at 40 cents per share, the same level as in 2019. With a yield of 4.2%, the stock has had about a minus 4% return over the past three years.

‍

The shares of Conagra Brands, a company that yields about 3.5%, are currently down about 2% over the past year.

‍

In addition to Duncan Hines, Reddi-wip, and Hunts, the company also has other brands. The company aims to have a dividend payout ratio - the percentage of earnings that are paid as dividends to shareholders - in the range of 50-55%. It is reasonable for the company to set its dividend at that level, and it leaves room for the dividend to grow in the future.

‍

It is worth mentioning that Conagra Brands paid out roughly half of its earnings to shareholders in the most recent fiscal year, which ended in May.

‍

In recent years, the company has increased its dividend several times, most recently in 2022 when it increased the dividend by almost 6% to 33 cents a share from 31.25 cents on a quarterly basis, with a total of nearly 7,000 shares in the company.

‍

This past year, Molson Coors Beverage (TAP) has returned about 2% in its stock price as compared to its 3.2% yield.

‍

There have been two increases in the dividend since the company reinstated it in 2021, the most recent being in February when it went from 38 cents to 41 cents, which is a quarterly increase.

‍

During the company's fourth-quarter earnings call in February, Tracey Joubert, the company's chief financial officer, told analysts that the company's intention was to sustainably increase the dividend.

‍

According to the company's financial statements, it paid out dividends of $1.52 per share last year on earnings of $4.10.

‍