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The Top-Ranked Dividend Growth Stocks In The Consumer Staples Sector

Jun. 05, 2020 9:00 AM ETBF.B, CL, COST, HRL, KMB, KO, PEP, PG, TR, WMT31 Comments
FerdiS profile picture


  • This article presents the top-ranked dividend growth stocks in the Consumer Staples sector.
  • To rank stocks, I sort them by decreasing quality scores based on DVK Quality Snapshots and break ties by comparing up to three additional metrics, in turn.
  • The article includes tables presenting quality indicators, key metrics, and fair value estimates.
  • Investors looking to expand their Consumer Staples sector holdings may find the information in this article useful as a basis for further research.

While the stock market has recovered much of the losses suffered in late February and March, the economic impact of the COVID-19 pandemic remains significant. Nearly 40 million Americans have filed unemployment claims in April and May, and GDP numbers will soon show the largest contraction since the Great Depression. In my view, it is crucial for dividend growth investors to focus on quality even more than before!

In April, I presented the three top-ranked dividend growth stocks in each of the GICS sectors. Following a reader's suggestion, I decided to start a new series of articles ranking dividend growth stocks in each GICS sector by quality score. The first article presented the top-ranked Industrials.

This article presents the ten top-ranked dividend growth stocks in the Consumer Staples sector.

I consider dividend growth stocks to be stocks with increasing dividend payouts in each of the past five years. Dividend Radar publishes a list of dividend growth stocks every Friday.

To rank dividend growth stocks, I sort them by decreasing quality scores as determined by DVK Quality Snapshots and I use three additional metrics to break ties.

Sector Averages and Performance Comparison

Dividend Radar provides a spreadsheet with dividend and fundamental data. It is quite informative to compare sector averages and the historical performance of sectors over different periods:

Sources:Dividend Radar (May 29, 2020) • Fidelity Research (4 June 2020) GoogleFinance

The table is color-coded to show the highest (green) and lowest (red) values in each column.

Sector performance charts give another interesting perspective, especially when comparing those performances to the performance of the S&P 500:

It is interesting to note that Consumer Staples have trailed the performance of the S&P 500 in each of the time frames in the charts above.

Quality Assessment

DVK Quality Snapshots

This article was written by

FerdiS profile picture
FerdiS invests in dividend growth stocks and writes options to boost dividend income. He manages DivGro, a portfolio of mainly dividend growth stocks created in January 2013. With investment and trading experience spanning nearly 20 years, FerdiS enjoys writing articles about dividend growth investing, options trading, stock selection, portfolio management, and passive income generation. His DivGro blog hosts more than 1,000 posts and a live, public spreadsheet with full details of his DivGro portfolio, allowing readers to follow along in his investment journey. FerdiS is collaborating with the founders of Portfolio Insight, an online platform for portfolio management and investment analysis. Together, we maintain and publish Dividend Radar, a free spreadsheet of dividend growth stocks, on a weekly basis.

Analyst’s Disclosure: I am/we are long ADM, COST, HRL, KO, MO, PEP, PG, PM, WBA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (31)

lytran1952 profile picture
Thank you, @FerdiS, for the excellent analysis.
FerdiS profile picture
Thanks, lytran1952 -- I appreciate your kind words.
Thanks as Always!!

Great Job! Thanks Again for Sharing with the Minions!!

FerdiS profile picture
I appreciate your comment, Bill -- take care and happy investing!
Eric in Paris profile picture
Thanks a lot @FerdiS for the clear and informative article.
I really enjoy reading your pieces, which bring a lot of sense-making to me.
I will wait a little for a more optimal entry point for PEP, which I have been meaning to own for a while now.
I 'm looking forward to reading your next GICS DG stocks ranking installment.
Definitely would love to read about the Energy sector, as it still looks very volatile in the coming months despite the latest rally.
Thanks again.
FerdiS profile picture
You're welcome, Eric in Paris -- thanks for your kind words.

I understand if you want to wait for a better entry point for $PEP. Thinks are a little hot in the markets now... and perhaps you'll get a better entry soon.

Thanks for sharing your interest in Energy sector coverage. I'll probably do Health Care next, and hopefully get to Energy soon enough!
BM Cashflow Detective profile picture
$SJM is currently trading at the current P / E 12.34, significantly below the fair value of P / E 16.68. There are clear changes here for the better. Q1 sales growth plus 10%. Free cash flow margin Q1 8%, Q2 8%, Q3 21%, Q4 24%. According to the consensus estimates with forecast annual sales growth of minus 0.3%, the forecasts for the company's sales growth remain very weak over the coming reporting periods. But the analysts highlighted the positive development of the group's business activity by significantly revising their earnings / share expectations upwards with forecast annual earnings growth of 8.3%. This results in a good PEG ratio of 1.9x. The RSI is currently showing an oversold situation. In my opinion, a very good entry-level moment for a share purchase. Of course, this company is not of the same quality as the top companies in this industry, but it has a much better chance / risk ratio. After that it is not absolutely necessary to pay premium prices. Otherwise great article.
FerdiS profile picture
Thanks for sharing your research on $SJM -- I'm sure readers would benefit. It's always a good idea to look more broadly at stocks in these lists, but not everyone has time to thoroughly analyze everything~ So my approach is to use DVK Quality Snapshots to highlight high-quality stocks, and, hopefully, allow readers to spend available time more effectively. Of course, that's but one approach... and I appreciate you pointing out a potentially better chance/risk ratio.
I'm surprised MKC did not make the list.
It’s #11, in case you didn’t see it at the bottom of the article.
FerdiS profile picture
$MKC just missed the top 10.
FerdiS profile picture
Nate the Great profile picture
FerdiS - thanks, as always! I've got 6 of the 10 (KMB, HRL, CL, PG. PEP, KO). That's one more than you, which is pretty rare! All are in either my ROTH or HSA, both of which I allow to grow without any withdrawals for expenses in retirement, so the yields are adequate for that purpose.
FerdiS profile picture
Hi Nate, thanks for sharing! The one you have that I don't is $CL... the CDN is just not high enough, even though the yield is reasonable. High-quality stock, though!
buddyrow4 profile picture
FerdiS profile picture
@FerdiS ,
This is a great series FerdiS. Thank you for sharing your work with us. I still have your sector analysis reports that you published last year.
I have been interested in increasing my allocation to this sector for some time, but its been hard to find a high quality stock at a good valuation when I've had funds available. I did pick up ADM recently, and I've been happy about this one so far.
Its interesting that you're estimating PEP to be fairly valued. Morningstar appears to agree with you, however FastGraphs has it looking about 18% overvalued based on its current vs historical 10 yr P/E ratio.
I would love to see you do an analysis of another defensive sector, either utilities or health care. Thank you.
FerdiS profile picture
@Rickmurquhart -- I might just do Health Care next. The sector is performing really well over the past year or so, only lagging Information Technology. And I'm hoping to see some progress on developing a vaccine for Covid-19. We sure need that and fast!

The Consumer Staples sector has some high-quality stocks, but these seem to be trading at a premium valuation most of the time. That's why I sometimes even pay a bit of a premium to get in, such as with $PEP when I opened my position. I'm not sorry I did that, as the stock has performed really well for me!

My FV includes a forward-looking component, which you can somewhat see in the dashed line in FASTGraphs. As a long-term investor, I think it is OK to have that. And, certainly, for the stocks rated Exceptional or Excellent, I think sometimes paying a little premium price is fine.
Thanks FerdiS - fantastic info!
I have some of these and pleased I picked up PEP a couple years ago.
Happy that you shared the next tier, as I always seem to have #11 (took plunge on “seldom discounted”, but reliable MKC).
Surprised WDFC isn’t higher (low div, but 10-15% yearly Div growth; steady performance like MKC.)

FerdiS profile picture
I appreciate your comment, Engineer@56 !

I remember paying a little premium when I opened my $PEP position, and I'm glad I did pick it up at the time. $PEP has performed nicely for me!

One reason I include the next tier stocks is precisely for comments like yours -- and, indeed, $MKC is one of those stocks that perform quite well.

Take care and happy investing!
Just looked at your web page for 1st time...what a gem!
Great work and so good of you to share the methodology and mechanics of your evaluations and selections, as well as progress and results.
Well done!!

Given US migration from Company-managed pensions to self managed 401K’s, this web page material should be a mandatory high school course.
OR something equivalent should be rolled out as part of the “Migrate people off Social Security plan”

My only regret is that I spent every bit of extra time outside of work hours on work!, vice investing in myself for a better understanding these financial methods and my future.
Thankfully, I still have some runway to play catch-up and your web page gives an excellent balance of Dividend growth with a sprinkling/handful of solids growth stocks (have about 30 of same DG’s; my few non-DG/“gambling wildcards” are Paypl, SQ, EQIX and now TJX).

Cant say enough how I appreciate your good work, especially how you integrate this with other reputable experts like Justin Law (CCC) and Dave Van Knapp (Quality snap shots).

FerdiS profile picture
I'm glad you find my website of value, @Engineer@56 -- and I really appreciate your kind words. One of the sad things about the American schooling system is that it fails miserably in making Americans financially literate. And the problem is most live from paycheck to paycheck, which does not bode well for the future as people approach retirement.

I've been inspired by other bloggers who built up significant dividend income streams with much less income than I'm fortunate to earn. The best example is Jason Fieber (https://www.mrfreeat33.com/), who became financially "free" at the age of 33. A prolific blogger, Jason has a significantly alternative lifestyle than mine, and although we fundamentally disagree on many aspects, I highly respect Jason's disciplined approach to DGI.

So, I'm happy to hear that my blog serves as inspiration for others, as I've benefited so much from learning from others and being inspired by them!
Thanks for your article Ferdi. I like your 10....Nice job...
FerdiS profile picture
Thanks, AlieGee -- I appreciate your comment!
Joel Irwin profile picture
Thanks for the update - I own the top 3, and adding to PEP & PG as shown here: seekingalpha.com/...

I'm 1.8 years behind you and look to track your performance pretty closely in the last part of 2018. Also looking forward to your next option update, I got 5 expiration's coming up on the 19th
FerdiS profile picture
Hi, @Joel Irwin -- thanks for sharing the link to your recent blog article. It looks like you have a great portfolio and congratulations on avoiding any dividend cuts or suspensions. I've suffered a few, so far.

I should do another options update soon. We'll see how it goes!
c0nst profile picture
Super-mega-cool as always! Thank you very much.
Added to PEP and ADM recently. Was considering adding to HRL but ~10% premium is too much.
I also think SYY is undervalued - it will recover quickly unless we get another wave of virus, opened a starter position.
You were right, must have crystal ball, as SYY jumping 6% so far today!
Quality stock and restaurants are slowly opening...
FerdiS profile picture
Thanks for commenting, @c0nst -- I appreciate your kind words. $PEP and $ADM are great additions, in my view. $HRL would be great too, but for the current valuation. I hope you get an opportunity to add soon.

Also, thanks for sharing your thoughts on $SYY. Good timing!
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