Top Consumer Staples Stocks for June 2023 (2024)

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• e.l.f. Beauty Inc.: See company description.
• New Oriental Education & Technology Group Inc.: New Education is one of the largest private tutors in China with 712 learning centers and 26,000 teachers. The company swung to a profit in the most recent quarter, reporting net income of $94 million after losing $126 million a year ago. The company has seen consistent growth in the livestream e-commerce business it launched in 2021 amid a regulatory crackdown on China's private education sector.
• Hims & Hers Health Inc.: Hims & Hers is a health and wellness company that operates an integrated Telehealth platform, medical record system, and online pharmacy. The company's net loss shrank by 39% in the first quarter, while subscriber count and total revenue both nearly doubled from the prior-year quarter.

Advantages of Consumer Staples Stocks

Several key advantages of consumer staples stocks include stability, growing dividends, and lower volatility.

Stability:Consumer staples stocks typically generate consistent earnings as they offer products and services that remain in demand irrespective of the economy's health. Consumers will always need to purchase household goods, toiletries, and food, even during periods of declining discretionary income.

Growing Dividends: Given that consumer staples stocks generate consistent profits, they usually pay investors steady dividends. Indeed, many names in the group are also dividend aristocrat stocks—companies in the that have raised their dividend for 25 consecutive years. The XLP ETF yields 2.55%, which is above the S&P 500's 1.66% dividend yield.

Lower volatility: During periods of economic uncertainty, consumer staples stocks can help investors minimize risk as they typically display lower levels of volatility compared to other sectors. For instance, if the broader stock market falls 2%, the average consumer staples stock may fall by about half that amount.

Cons of Consumer Staples

Two key disadvantages of consumer staples stocks include slower growth and changing consumer preferences.

Slower Growth: During times of economic expansion, the group often underperforms growth companies, such as fast-moving technology stocks. Investors who overweight consumer staples names in their portfolio during bull markets may miss out on sizeable market gains in other sectors.

Changing Consumer Preferences: Many consumer staples stocks are established companies that rely on consistent consumer spending patterns. Changing preferences, such as a move to online shopping and the uptake of specialty brands, have the potential to disrupt the sector.

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As of the date this article was written, the author does not own any of the above stocks.

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