Consumer staples stocks are highly regarded by the investing community for the reliability of their profits. It isn’t difficult to understand why. Companies like Kimberly Clark Corp (NYSE:KMB) sell products ranging from paper towels to tissues, products that consumers will purchase regardless of the overall economic climate.
In addition, consumer staples stocks traditionally distribute a majority of their profits to shareholders via compelling dividend yields. Over the past couple of years, Kimberly Clark has rewarded its investors with not just hefty dividends, but also impressive share price gains. As a result, this begs the question: is Kimberly Clark, the company behind Kleenex, Cottonelle, and Huggies, the best consumer staples stock to buy today? Or is there a more worthy industry peer to consider?
Slow-and-steady stocks that have been anything but
Investing in the consumer staples sector is usually a conversation dominated by dividend payouts, and less so by compelling share price gains. However, notable industry titans including not just Kimberly Clark Corp (NYSE:KMB), but also The Clorox Company (NYSE:CLX), and Colgate-Palmolive Company (NYSE:CL), have soared in price over the past year.
Clorox is an industry leader with many well-known brands. The company sells its products in more than 100 countries, and has many household brands including its namesake bleach, Kingsford charcoal, Pine-Sol cleaner, and Glad trash bags. Nearly 90% of Clorox’s brands hold the No. 1 or No. 2 market-share positions in their categories.
Colgate Palmolive is no slouch. The company is tightly focused on Oral Care, Personal Care, Home Care, and Pet Nutrition. Colgate sells its products in over 200 countries around the world, under such internationally recognized brand names as Colgate, Palmolive, Mennen, Speed Stick, Softsoap, and Irish Spring.
Since these stocks have rallied so much in recent months, their valuations may be a cause for hesitation among investors considering buying shares. Clorox, Kimberly Clark Corp (NYSE:KMB), and Colgate Palmolive trade for 20 times earnings. Colgate-Palmolive’s valuation now exceeds 25 times earnings.
Hefty dividends that will keep coming in for many years
Thankfully, each of these companies has continued to grow dividends at a healthy rate, meaning new investors are still getting market-beating yields. The broader market, as measured by the S&P 500 Index, yields roughly 2%. Kimberly Clark and Clorox both yield 3.3%, while Colgate yields just 2.5% at recent prices, due to its higher multiple.
Moreover, each of these stocks should continue to increase their shareholder payouts for many years to come. As previously mentioned, their stable business models mean steady, reliable growth. In addition, they each have fantastic track records of raising dividends every year, meaning investors now fully expect those streaks to continue.