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4 Low Risk Consumer Staples Stocks to Buy Now

Consumer confidence - a key determinant of the economy's health - has been improving significantly of late. A gradual recovery in the housing market as well as the manufacturing sector played a crucial role in raising buyers' confidence.

Cheaper gasoline prices and a strong labor market increased household wealth, which eventually boosted consumer spending. Positive GDP also lifted stocks. In addition to this, economic growth was boosted by a pickup in construction spending, increased business spending on equipment, a bigger buildup in inventories and higher government spending.

However, the growing concern over the health of the Chinese economy continues to unnerve investors and the spillover effect is clearly visible across the borders, be it in the Asian, European or the U.S. markets. The world's second-largest economy took the financial markets and global economy by surprise when it unexpectedly devalued its tightly controlled currency, the yuan, signaling that the economic situation was even worse than originally perceived.

Amid a derailed Chinese economy, the U.S. Federal Reserve's decision to keep interest rates unchanged seems a wise one due to adverse conditions of the global economy, heightened market volatility and low inflation. The interest rate hike in such a situation would have drawn investment funds out of emerging markets and put them back in the U.S.; heightening investors' concern.

In such a scenario, it may be a good idea to look at some consumer staples stocks that have the potential to outperform. A time-tested way to earn stable returns in an unpredictable economic environment is to invest in low-beta stocks that pay high dividend yields and have attractive Zacks Rank. Before we handpick the right stocks, let us delve a little deeper into the parameters for selecting such stocks.

Our Screening Metrics

Beta , one of the most commonly-used appraisal measures of a stock's volatility, measures the tendency of a stock's returns to respond to market swings. For example, the market as a whole has a beta of 1. Therefore, a stock with a beta of less than 1 is less volatile compared to the entire market, while a stock with a beta higher than 1 is more volatile.

Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.

The other parameter, dividend yield, assesses the amount of income received in proportion to the share price. Amid the current volatility, it could be a smart strategy to buy stocks that yield good dividends, thus ensuring a steady income.

Thus, flaunting a solid Zacks Rank #1 (Strong Buy) or #2 (Buy), a beta of less than 0.8, and dividend yields of more than 2.2%, we have zeroed in on four stocks that have bright prospects to ride out the impending volatility.

4 Prominent Picks to Buy Now

Altria Group, Inc.MO

Marlboro maker Altria Group is one of the leading manufacturers of cigarettes and smokeless tobacco products in the U.S.

Altria boasts a solid balance sheet and regular shareholder returns. This Zacks Rank #2 company has consistently raised its dividend. According to Altria's most recent 10-K filing, the company has paid just over $10.9 billion in dividends during the three years ending 2014. With a dividend yield of 4.17% and a beta value of 0.54, this stock looks to be a great buffer for your portfolio in uncertain markets.

Cal-Maine Foods, Inc.CALM

Based in Jackson, MS, Cal-Maine Foods is the one of the largest producers and distributors of fresh shell eggs in the United States. This Zacks Rank #1 company believes that strong performance of its specialty eggs are driving growth, given favorable consumer demand trends. The company is making appropriate investments to expand its production capabilities for specialty eggs and enhance its product mix.

Cal-Maine has a great dividend yield of 2.25% and has a beta value of 0.73.

The J. M. Smucker CompanySJM

Smucker is a leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and natural foods products in North America.

The company has been pursuing acquisitions to boost its portfolio. Besides, the coffee company has been in the news after it lowered packaged coffee prices of the majority of its products sold in the U.S. , primarily consisting of items under the Folgers and Dunkin' Donuts brands. Smucker licenses Dunkin' Donuts from Dunkin' Brands Group, Inc. DNKN . With a dividend yield of 2.37% and a beta value of 0.61, this Zacks Rank #2 stock looks attractive.

Reynolds American, Inc.RAI

Cigarette maker Reynolds American boasts an impressive portfolio of tobacco products, which helps it to maintain strong business momentum and generate decent profit. The company has been able to maintain a leading position in the Smokeable tobacco and smokeless categories. Investors also remain encouraged by Reynolds' increased investment in its e-cigarette brand, Vuse.

Following its recent merger with rival Lorillard Inc., the company now has opportunities to grow in the industry. The merger has also brought Lorillard's leading Newport and Reynolds' Camel brands under the same banner.

Reynolds American has a Zacks Rank #2 and yields a dividend of 3.38% and has a beta value of 0.57.

Bottom Line

Intelligently selecting stocks for investments greatly benefits investors. The abovementioned stocks can prove to be valuable additions to investors' portfolio.

You can use the Zacks Stock Screener to find other stocks with this winning combination. Investors can confidently end their search at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts' constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALTRIA GROUP (MO): Free Stock Analysis Report

REYNOLDS AMER (RAI): Free Stock Analysis Report

SMUCKER JM (SJM): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

DUNKIN BRANDS (DNKN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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