15 best consumer staples stocks for 2021

Consumer staples stocks face a possibly challenging environment in 2021. These 15 picks have an edge over their peers, however ... and analysts' stamp of approval.

  • By Jeff Reeves,
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Consumer staples stocks held up well in 2020, and for good reason. When the worst of the pandemic hit in March, Americans stocked up on toilet paper and bottled water, with social media full of pictures showing empty grocery store shelves.

As we look to 2021, however, investors should be more discerning about what stocks they're putting in their shopping carts. While the pandemic still is raging in many areas of the U.S., with record cases and serious strains on the healthcare system, there is also favorable news about research into vaccines that should give everyone hope that next year will be much better – for our health, for our economy and for our sanity.

That's not necessarily welcome news for every company that sells household necessities, however. If you're looking to reposition your cash in consumer staples, then, you may want to look beyond 2020's "stay-at-home trade" names that did well but might be running out of gas.

Here are 15 of the best consumer staples stocks for 2021. Each one has plenty to offer in the coming year, and isn't simply dependent on pandemic stockpiling to boost performance. Better still, Wall Street's analyst community rates each of these stocks a Buy or Strong Buy on average. Average analyst scores are listed for each stock; any score below 2.5 means that analysts, on average, rate the stock as being Buy-worthy. The closer a score gets to 1.0, the stronger the Buy recommendation.

Data is as of Nov. 22. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Analysts' opinions provided by S&P Global Market Intelligence. Stocks listed in reverse order of bullishness by the analyst community.

Altria Group

Market value: $74.2 billion

Dividend yield: 8.6%

Analysts' opinion: 6 Strong Buy, 4 Buy, 6 Hold, 0 Sell, 0 Strong Sell (2.00)

Comprised of the domestic tobacco operations of what was once Philip Morris, Altria Group (MO) is the brand behind Marlboro cigarettes, Copenhagen and Skoal chewing tobacco and Black & Mild cigars. It also owns Ste. Michelle wineries. Collectively, these offer a reliable backbone of revenue.

Altria's stock took its lumps in 2020, even though stressed-out Americans continued to indulge during the pandemic. But it could be one of the best consumer staples stocks of 2021 thanks to its big strategic investments in key growth markets.

This includes a stake in mega-brewer Anheuser-Busch InBev (BUD), cannabis firm Cronos Group (CRON) and vaping giant Juul Labs, as well as "nicotine pouch" manufacturer Burger Group, which will operate under Altria's new Helix Innovations subsidiary. These pouches allow consumers to enjoy varying doses of the drug in cigarettes without any chewing, spitting, smoking or odor.

Altria faces several headwinds, of course, including the basic fact that cigarettes are unhealthy. But with a generous 86-cent quarterly dividend that has been increased at least once annually for more than 50 years but still remains less than 75% of earnings, clearly management knows how to navigate these low-growth waters.

And looking forward, the strategic investments in several high potential areas, including vaping and cannabinoids, could really pay off. With a dividend yield of well more than 8% at present, investors have plenty of reason to sit on MO stock in 2021 and patiently wait for this long-term strategy to pay off.

Costco Wholesale

Market value: $168.2 billion

Dividend yield: 0.7%

Analysts' opinion: 14 Strong Buy, 7 Buy, 9 Hold, 2 Sell, 0 Strong Sell (1.97)

Costco Wholesale (COST) has long defied the general downtrend for retailers for a host of reasons.

For starters, its bare-bones wholesaling operation doesn't require the same attention to detail in its storefront. Warehouses in the suburbs are in fact the ideal over chic urban real estate, and its dominant discounting model has won it tremendous loyalty among frugal shoppers.

It also has tremendously reliable cash flow when compared with other retailers. Consider that with some 58 million paid members at roughly $60 per pop in annual dues, COST also enjoys a robust $3.5 billion in annual sales rolling in simply from renewals.

It should be no surprise, then, that Costco has not just weathered the pandemic, but thrived amid it. Since the wholesaler provides staples and groceries it has seen the same uptrend as other stores in this category – but as it also sells items like flat-screen TVs and propane grills that have been in high demand amid the stay-at-home trend. As a result, COST stock has surged almost 30% this year compared with just under 10% for the S&P 500 in the same period.

As is typical, however, this growth isn't just a flash in the pan for Costco. Looking to fiscal 2021, the company expects revenues to grow by a little under 10%, and earnings to expand by low double digits. That means these gains are sticky, and part of a sustained uptrend.

If you're looking to rotate out of fashionable "stay-at-home" e-commerce plays and into consumer staples stocks in 2021, COST might be a good alternative right now.

Nestle

Market value: $329.0 billion

Dividend yield: 2.4%

Analysts' opinion: 12 Strong Buy, 8 Buy, 6 Hold, 2 Sell, 0 Strong Sell (1.93)

Switzerland-based Nestle (NSRGY), founded in 1866 and one of the biggest consumer staples stocks on the planet, is a standout example of a reliable but profitable investment.

Shares admittedly dipped about 20% for a week or two during the worst of the market volatility in March, but they quickly snapped back to regain that lost ground and steadily march higher. In fact, NSRGY is up against all-time highs after a good performance in 2020.

But the real story here for new investors isn't the recent performance of its world class product portfolio, which includes Gerber baby foods, Purina pet products and Stouffer's frozen foods, as well as iconic Nestle chocolates, and Nescafé and Nespresso coffee products. The bigger news is that more recent products are catching on at a rapid pace – particularly those under its supplements and health nutrition lines. The CEO recently told Bloomberg this unit "is going to be one of our key growth drivers" with 2021 revenue of more than $4 billion – double what it was just five years ago.

Putting its money where its mouth is, Nestle has also embarked on a flurry of recent acquisitions that include six health-related nutrition and supplements companies since Jan 1. The most recent was a $950 million deal for Freshly, a leading provider of healthy direct-to-consumer prepared meals.

As recent healthy diet trends have worked against some legacy brands that haven't evolved with consumer tastes, Nestle is not just keeping up but blazing a trail for the future. This is great news for investors, and a sign that the nice pop seen from 2020's stay-at-home craze might only be the beginning for NSRGY.

Energizer Holdings

Market value: $2.8 billion

Dividend yield: 2.9%

Analysts' opinion: 6 Strong Buy, 4 Buy, 2 Hold, 0 Sell, 1 Strong Sell (1.92)

An interesting twist on the consumer staples surge in 2020 is the fact that Energizer Holdings (ENR) was expected to do quite well as folks stayed at home using battery-powered gadgets; however, it fell short thanks to the ugly realities of its supply chain.

In its fiscal Q4, for instance, it actually was selling batteries close to cost when you accounted for the fact it had to fly in batteries from Asia to the U.S. to meet required service levels. And in places, it still was fined by some retailers anyway as record demand resulted in empty display cases.

Throw in expensive internal coronavirus mitigation efforts, and the result has been disappointing financials lately.

The result has been slow going for ENR in the second half of 2020, with shares off about 20% from their August highs. However, things have stabilized, and this iconic battery brand is looking up again. Of particular note is its automotive business, which saw serious headwinds amid the slowdown in vehicle sales, but is looking up after several strong months of recovery in U.S. auto sales.

Revenue forecasts aren't burning down the house for the next fiscal year, with only single-digit gains projected. But earnings are set to surge from $2.31 in EPS for fiscal 2020 to $2.99 in 2021 and $3.47 in 2022. So despite its troubles earlier in 2020, ENR stock could be one of the best consumer staples stocks for 2021 and even further out.

Estée Lauder

Market value: $87.0 billion

Dividend yield: 0.9%

Analysts' opinion: 11 Strong Buy, 6 Buy, 3 Hold, 2 Sell, 0 Strong Sell (1.82)

Estée Lauder (EL) might not be on your radar, since many investors might presume cosmetics and personal care products are on the outs as everyone hangs around at home in yoga pants. However, Estée Lauder continues to find a way to thrive thanks to its dominant brand portfolio, which includes not only its namesake makeup, but Tommy Hilfiger fashions and Clinique skin care products.

In fact, its recent fiscal Q1 earnings showed that while the pandemic is indeed weighing on its makeup sales, with the total top line down 9% year-over-year, it was a big sequential improvement over the prior quarter across every business line. Furthermore, cost cutting to minimize the impact of lower sales helped prop up earnings in a big way as EL posted earnings of $1.44 against expectations of only 90 cents per share. That's a huge beat, and proves the company is in good hands.

Because its fiscal year started in June, straddling the pandemic, it's hard to make easy comparisons about this calendar year to last. However, investors should take comfort that the current fiscal year ending in June 2021 is projected to feature 7% revenue growth – followed by another 10% in fiscal 2022.

As evidenced by EL's share price lately, Wall Street clearly is more focused on these forward-looking forecasts than the impact of the pandemic months ago. The stock is up an impressive 16% so far this year to beat the S&P 500 by about 6 percentage points in the same time period.

Reynolds Consumer Products

Market value: $6.4 billion

Dividend yield: 2.9%

Analysts' opinion: 4 Strong Buy, 3 Buy, 2 Hold, 0 Sell, 0 Strong Sell (1.78)

Reynolds Consumer Products (REYN) is the parent company behind Hefty trash bags and disposable tableware, Fresh-Lock zipper bags and Reynolds-branded parchment paper, foil and plastic wraps.

While you might be very familiar with these longstanding consumer staples brands, REYN stock itself has been kicking around for less than a year. After the eponymous foil biz was bought from Alcoa (AA) in 2007, then rolled into a conglomerate with Hefty manufacturer Pactiv in 2010, owners restructured the business. Then, they brought the current version of Reynolds to public markets in a January IPO priced at $26 per share.

The timing was difficult, to be sure, as the pandemic hit soon after. But now REYN stock is trading at around $30 thanks to proof that it is hanging tough. And looking forward, investors can have confidence the stock is not going to simply take the money from that IPO and run. It's projecting a roughly 7% bump in the top line this fiscal year thanks to stay-at-home cooking trends, but it's forecasting flat 2021 revenues – meaning it expects to hang on to every bit of the gains it has made even when folks return to eating out.

That's in part because, according to its IPO prospectus, REYN isn't just relying on old brand recognitions. It expects 20% or more of revenue going forward to come from products less than three years old, including compostable parchment paper for eco-friendly shoppers and slow-cooker liners for folks who just discovered a new pot roast recipe during lockdown but don't like to do the dishes.

With a strong baseline of sales, a 3% dividend and a potential path for growth, this new version of an old favorite is worth a look.

Coca-Cola

Market value: $226.3 billion

Dividend yield: 3.1%

Analysts' opinion: 10 Strong Buy, 6 Buy, 5 Hold, 0 Sell, 0 Strong Sell (1.76)

What's there not to like about Coca-Cola (KO) one of the biggest consumer brands on the planet? This bulletproof company is valued at more than $220 billion, does business in almost every country on the planet, boasts Warren Buffett's Berkshire Hathaway (BRK/B) as one of its biggest shareholders and offers a juicy 3% dividend that has been increased at least once a year for nearly six decades.

The stability of this mega-corporation is a big selling point for many investors, and buying Coke has an obvious appeal if you're concerned about continued economic or political disruptions. But looking ahead to 2021, there are a few specific reasons to think that now might be a better time than ever to increase your exposure to this consumer staples stock.

For starters, Coca-Cola's shares jumped an impressive 6% in a single session at the beginning of October on hopes that a vaccine could help hasten the reopening of restaurants – a key source of demand for KO products. This was coupled with comparatively strong performance to other COVID-sensitive companies, with recent earnings showing just a 9% decline in last quarter's revenue compared with the prior year. Considering foodservice and related sales to bars and restaurants represent almost half of its revenue, that was much smaller impact than investors had prepared for.

Leadership has done what is necessary to weather the storm, and KO is poised to bounce back big in 2021 when the pandemic settles down. With a bulletproof balance sheet and a big dividend, investors have reason to stick around and be patient for that recovery.

Hostess Brands

Market value: $1.8 billion

Dividend yield: N/A

Analysts' opinion: 7 Strong Buy, 2 Buy, 3 Hold, 0 Sell, 0 Strong Sell (1.67)

When you're feeling down, indulging in a Twinkie or three is sometimes the best way to cheer yourself up. And as a result of plenty of stress in 2020 thanks to a toxic election cycle and a global pandemic, Hostess Brands (TWNK) has seen a nice lift to sales to consumers desperate for a pick-me-up.

But looking beyond the projected revenue growth of more than 10% this year, it's important to acknowledge that many of these customers seem to keep coming back. As CEO Andy Callahan noted recently, the initial surge after lockdowns and stockpiling in spring was not just sustained – but gathered steam over the intervening months.

"We're seeing that continue and actually accelerate with the number of households and in repeat purchases," he told Yahoo! Finance recently.

Hostess has faced plenty of challenges over the past couple of decades, first filing for bankruptcy in 2004, then again in 2012. The latter resulted in a brief closure where its sweet treats were not in production for several months until someone bought the remnants of the once-powerful brand. And then, when production restarted, many longtime fans noticed the ingredients or sizes of their favorite snacks had changed.

It's odd to think that it took a pandemic to push folks back to Hostess or bring in a new generation of customers, but that might just be the case.

With a string of recent earnings surprises and the wind at its back, 2020 might just have marked the year that Hostess gets back on track for good. 2021 could see it join the ranks of the market's better consumer staples stocks.

Albertsons

Market value: $7.4 billion

Dividend yield: 2.6%

Analysts' opinion: 9 Strong Buy, 4 Buy, 3 Hold, 0 Sell, 0 Strong Sell (1.63)

Admittedly, Albertsons (ACI) saw big growth in 2020 by virtue of simply being a grocery store in a year when folks dramatically cut back on eating out thanks to the coronavirus pandemic. And when you look forward, the forecasts for ACI in 2021 compared with this short-term surge in stapes sales admittedly aren't particularly impressive.

But what makes Albertsons worth a look is that fact that this company didn't just sit around ringing up sales and resigning itself to business as usual in life after the pandemic. A rapid shift to online sales not only has allowed ACI to capitalize on the current environment of social distancing, but has helped it create a powerful platform to reel in future customers, too. Consider that in October, it reported that online transactions exploded more than 240% year-over-year!

Folks getting hooked on the online shopping engine is undeniably a good thing for future performance and keeps Albertsons from falling behind other digitally savvy competitors.

At the same time, ACI recently restructured and paid down debt thanks to the windfall of 2020 to deliver $52 million in annual interest payment savings.

Grocery stores are notoriously low-margin operations without a lot of growth potential. So to see Albertsons capitalize on the disruptions of 2020 to build a more efficient foundation for its business is a strong sign this company could deliver for investors again in 2021, too.

Philip Morris International

Market value: $119.5 billion

Dividend yield: 6.3%

Analysts' opinion: 11 Strong Buy, 4 Buy, 4 Hold, 0 Sell, 0 Strong Sell (1.63)

More than a decade ago, in part thanks to the tarnish of Big Tobacco lawsuits and negative attention, the traditional businesses of Philip Morris were restructured in a big way. Packaged foods were spun out under the Kraft name in 2007. Then in 2008, the core U.S. tobacco business was rebranded as Altria, while the international tobacco arm carried on as Philip Morris International (PM).

As the name implies, this is nearly an entirely international operation that has very little footprint within the United States. And while smoking may not exactly be a growth industry for obvious reasons, sales have remained very consistent for PM over the years thanks to big brands including Marlboro and Parliament. Philip Morris commands six of the top 15 global cigarette brands.

This strong product portfolio has enabled PM to squeak out slightly higher revenue in each of past three years and support a generous dividend north of 6% in yield at present.

While this all adds up to tremendous stability, what puts Philip Morris among the best consumer staples stocks for 2021 is what we learned in its October earnings report. PM handily beat on both revenue and earnings thanks to a pandemic-proof business, but more importantly, it forecast an impressive 8% revenue bump next fiscal year and earnings per share that could grow by double digits.

That bullishness is powered in large part by its high-tech IQOS "tobacco heating system" that offers a smokeless alternative to traditional cigarettes. IQOS and similar products amounted to more than 10% of total shipment volume in the quarter.

You don't have to be a smoker to see the potential here as this well-run operation moves into a new growth area in earnest in 2021.

Mondelez International

Market value: $81.7 billion

Dividend yield: 2.2%

Analysts' opinion: 12 Strong Buy, 7 Buy, 2 Hold, 0 Sell, 0 Strong Sell (1.52)

When Kraft was still a standalone company in 2012, before its megamerger with Heinz, it spun off Mondelez International (MDLZ) in an effort to energize its global snack sales generated by brands that include Cadbury chocolates and Oreo cookies. The thinking? The slow-and-steady North American staples business selling items like the iconic Kraft Macaroni & Cheese was different enough that MDLZ could benefit from being a standalone company with a separate mission and its own growth mandate.

That split has proven a blessing for MDLZ investors, as shares have steadily risen since its spinoff even as its sister Kraft embarked on its debt-bloated merger. Specifically, MDLZ shares are delivered a total return of about 44% over the past five years while the merged Kraft Heinz (KHC) has crashed by more than 45%.

Mondelez is uniquely positioned to benefit from a weak-dollar environment in 2021, which some experts are predicting as U.S. federal debts continue to rise and GDP growth remains sluggish thanks to the impact of COVID-19. Seeing as its North America revenue was just $7.1 billion of Mondelez's $25.9 billion in overall 2019 sales, the company is well-positioned for this situation.

On the heels of strong fiscal Q2 numbers in July that handily beat on both the top and bottom lines, MDLZ just posted impressive fiscal Q3 numbers in November that showed strong rebounds in sales across Asia, Africa, Middle East and Europe as stores reopened after long lockdowns. That has Mondelez in position to be one of the best consumer staples stocks of 2021 and beyond.

Post Holdings

Market value: $6.1 billion

Dividend yield: N/A

Analysts' opinion: 7 Strong Buy, 4 Buy, 1 Hold, 0 Sell, 0 Strong Sell (1.50)

Founded in 1895, Post Holdings (POST) has some of the biggest brands in the cereal aisle including Fruity Pebbles, Golden Crisp and Honeycomb. But the company also offers private-label cereal products to third parties as well as offering foodservice sales and ingredients to other packaged foods companies.

Although 2020 was a great year for many consumer staples stocks, POST largely sat out the rally as shares bounced along from April through October. That was because any gains made with its grocery store brands – which, while they constitute the firm's main business, are still only one-third of total revenue – were offset by the drag on foodservice. In fact, from Jan. 1 to mid-November, shares had actually given up more than 17%.

However, hopes of a vaccine and broader economic normalization make Post Holdings one of the best consumer staples stocks to buy for 2021. Even if recent spikes in coronavirus cases do seem to be putting a damper on any hopes that the pandemic is soon to be behind us, long-term investors could be well-served by staking out a position in POST stock now. Moves by management to weather the storm and increase efficiency are almost certain to pay off in 2021.

And until then, its strong consumer brands division will at worst keep this century-old company in a stable position until the dust settles.

TreeHouse Foods

Market value: $2.2 billion

Dividend yield: N/A

Analysts' opinion: 8 Strong Buy, 1 Buy, 2 Hold, 0 Sell, 0 Strong Sell (1.45)

Consumer staples company TreeHouse Foods (THS) offers a wide variety of goodies and packaged meals that you likely have enjoyed even if you didn't realize the parent company behind your cookies, teas, frozen pancakes or barbecue sauce. That's because THS primarily services grocery stores by delivering their house-brands products.

If you're a frugal shopper who has a go-to list of store-brand products, then you know this is a very reliable business indeed. But in addition to being a steady stock that investors can count on, TreeHouse has tapped into growth in 2020 by riding the wave of eating at home that was sparked by the pandemic – and considering we are seeing infection rates spike and some states moving to close restaurants again, that trend should continue for the foreseeable future.

TreeHouse topped Wall Street expectations in both Q1 and Q2 of 2020, and analysts are expecting earnings per share for fiscal 2020 to grow by more than 10% over the prior year. Looking forward, THS is looking to strengthen its branded offerings to look beyond private-label clients. That's evidenced by the recent acquisition of Riviana Foods' branded pasta lines for $242.5 million, which management expects to deliver 20 to 30 cents in extra earnings per share across the first full year of incorporated operations.

After a big rebound off the bottom in March, shares have admittedly softened up a bit lately. However, with a forward price-to-earnings ratio that is less than 10 compared with a typical P/E of about 25 for stocks in the S&P 500, now might be a great time to stake out a position in THS to capitalize on its 2021 growth plans.

MGP Ingredients

Market value: $716.6 million

Dividend yield: 1.1%

Analysts' opinion: 4 Strong Buy, 0 Buy, 1 Hold, 0 Sell, 0 Strong Sell (1.40)

It's safe to say most investors aren't familiar with MGP Ingredients (MGPI), a specialist in wheat proteins and food starches. However, many of us are decidedly familiar with the end products from other companies that use these ingredients – chief among them, distilleries making spirits like bourbon and gin. MGP's beverage alcohol line accounts for about three-quarters of revenue at present; it also has a robust industrial alcohols business that is in high demand amid the pandemic and the need for sanitizers.

MGPI is in the right place at the right time, and it shows. In October, MGPI reported another standout quarter, with sales jumping almost 14% and gross profit surging 23%, thanks in part to a record quarter for aged whiskey sales.

However, analysts are interested in MGPI for far more than its pandemic potential. Both Berenberg and National Securities initiated coverage with Buy recommendations in the last several months, and SunTrust upgraded the stock to Buy from Hold.

That's because big-picture, this still is a small stock with a lot of room to grow. The company sells its products primarily in the U.S., Canada and Japan and has plenty of untapped markets around the globe. It's also one of the smaller consumer-related stocks on this list at just more than $700 million in market cap. To top it off, MGPI is aggressively growing its dividend as it ramps up its business. Quarterly payouts of 12 cents per share are up 20% from 10 cents in 2019, 50% from 8 cents in 2018, and 200% from 2017's 4 cents.

Herbalife Nutrition

Market value: $5.9 billion

Dividend yield: N/A

Analysts' opinion: 3 Strong Buy, 0 Buy, 0 Hold, 0 Sell, 0 Strong Sell (1.00)

A few years ago, there was perhaps no stock more contentious than Herbalife Nutrition (HLF). Billionaire Bill Ackman shorted the stock heavily as another billionaire, Carl Icahn, went long. The two feuded publicly about the company (among other things) until Ackman finally abandoned his $1 billion bearish bet against the stock in 2018 and admitted defeat.

Now that Herbalife isn't getting quite as much attention from day-traders – consider volume topped 70 million shares in a single session back in 2015 and now only averages about 1 million or so shares daily – it's trading on fundamentals more than sentiment. That's a decidedly good thing for investors, too.

As proof, HLF jumped more than 10% in May on powerful results that showed strong sales growth. China in particular looked like a particularly promising growth market, as "volume points" or payments for product for future delivery jumped 29% on the quarter in this region and a potentially onerous legal fight with regulators over practices in the region seemed to be reaching a favorable conclusion.

More recently, in early November, HLF rallied more than 5% after it reported 22% growth in Q3 sales and a near-doubling in earnings per share over the prior year.

Shares admittedly are roughly right where they started the year. All these improvements have really just helped Herbalife's shares reclaim their steep losses during the market's contraction in spring 2020. And the hyper-strong score is based on a small group of just three covering analysts.

Nonetheless, HLF could come to life as one of the best consumer staples stocks for 2021.

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© 2020 The Kiplinger Washington Editors, Inc.
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