Unloved Food Stocks Deserve A Look

One of the sector that is currently unloved by the market is the food sector.Investors are avoiding food producers for a variety of reasons. Though many of the factors cited are understandable investors need not totally ignore stocks from the sector. As part of the consumer staple industry food companies deserve a look and are worth holding in a well-diversified portfolio as they can offer shelter during market downturns. Besides many of these firms offer stable and growing dividends. This makes them attractive for income seeking and long-term investors. The key point to remember is that even in recessions consumers have to eat food and these established companies are not just going to disappear anytime soon.

Some of the reasons for the current bearishness on the food sectors include:

  • Online retail goliath Amazon(AMZN)’s acqusition of Whole Foods. The argument is that Amazon would drive down food prices with its own brands and severely impact traditional food companies.
  • Consumers’ preference for healthy and non-sugary foods. Hence cereals like froasted flakes are out the window and the maker of such products will suffer.
  • Grocery chains and other retailers building out their universe of store brands that are priced much lower than name brand prducts. As more and more consumers move towards these cheaper brands the premium branded players will lose market share.
  • Fearing the collapse of the sector, some of the CEOs of a few large-cap food producers are fleeing the ship.
  • Pricing pressures and changes in consumer taste are also adversely affecting food makers.
  • In addition, millenials and other youngesters are avoiding traditional instant foods to healthier fare.

Despite all the negative reasons listed above investors can still consider food stocks especially at curent levels. Some of the major companies in the sector are listed below with their current dividend yields for consideration:

1.Company: Kellogg Co (K)
Current Dividend Yield: 3.46%

2.Company: General Mills Inc (GIS)
Current Dividend Yield: 3.77%

3.Company: Mondelez International Inc (MDLZ)
Current Dividend Yield: 2.15%

4.Company: Campbell Soup Co (CPB)
Current Dividend Yield: 3.01%

5.Company: ConAgra Foods Inc (CAG)
Current Dividend Yield: 2.50%

6.Company: Kraft Heinz Co (KHC)
Current Dividend Yield: 3.21%

7.Company: Danone SA (DANOY)
Current Dividend Yield: 2.37%

8.Company: The Hershey Company (HSY)
Current Dividend Yield: 2.42%

9.Company: Unilever NV (UN)
Current Dividend Yield: 2.53%

10.Company: Nestle SA (NSRGY)
Current Dividend Yield: 2.68%

Note: Dividend yields noted above are as of Oct 5, 2017. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long GIS


Also see: Consumer Staples: Why a “Boring” Sector May Be Worth a Look, Schwab, Oct 10, 2017

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