Negative Rates Point to Consumer Staples Stocks
The JP Morgan international bond index currently shows ~25% of gov't bonds are in negative interest rate territory. More importantly, the size of the negative rate gov't bond market has grown rapidly -- and dramatically -- from zero in mid-2014 to more than US$6 trillion today.
What happens to the risk ladder in asset-based investing with negative rates? It lights a fire under stable-growth, dividend-paying defensive stocks!
Believe it or not, of late, the MOST attractive defensive top-down S&P 500 sector has been Consumer Staples .
With no end in sight for negative government bond rates, investors should investigate holdings in defensive sectors of the S&P 500.
When the U.S. 10-year Treasury bond trades at a +1.7% annual rate, Consumer Staples stocks oftentimes can offer a dividend rate well above +2.0% annually. These companies also can generate annual EPS growth above +7%, to top it off.
In short, your stock portfolio will couple together two 'safe-haven' U.S. economy-based investment fundamentals. These can work hard for you.
The Zacks system shows the current top Consumer Staples industry is Consumer Products-Misc. Staples .
- The 9-company strong Misc-Staples space shows seven of nine share tickers get a Zacks #2 Rank (Buy) at the moment.
- That adds up to a stellar #8 out of 265 Zacks Industry rank.
- There have been 11 positive EPS estimate revisions of late, and 0 negative revisions.
You can't find a better defensive U.S. stock niche to mine… right now.
I list three top Zacks Ranked Misc. Consumer Staples stocks in order of their market capitalization (Smallest to Largest). All 3 firms are U.S.-based.
(1) Energizer Holdings ( ENR ) is a Zacks #2 Rank (Buy) stock, having fallen from a Zacks #1 Rank (Strong Buy) last week.
Shares also garner a Zacks VGM rating of B, due to its strong Zacks Growth score of A.
The stock currently trades at $42.50 a share, having recovered from the sell-off earlier this year. The PEG ratio is not cheap. It is 2.47. That adds up to a Zacks Value rating of C.
The share dividend offer is +2.35% annually.
Annual EPS looks to be $2.12 in 2016, while 2017 grows to $2.32. That is a believable EPS growth outlook for a stock with a $2.6 billion market capitalization. The average quarterly surprise over the last 4 quarters was +30%.
Energizer Holdings is a consumer goods company. The company offers solutions in portable power, lighting, wet shave and personal grooming, skin care, feminine care and infant care.
Energizer Holdings, Inc. is based in St. Louis, Missouri.
The company reports EPS on May 3rd.
(2) Blue Buffalo ( BUFF ) is a Zacks #2 Rank (Buy) stock.
Shares get a Zacks VGM of C, with a Zacks Value of D. NOTE: there is a great Zacks Growth rank of A. This is unusual for a Consumer Staples stock.
The stock currently trades at $23 a share, a little under an August 2015 high of $28. The PEG ratio is still cheap at 1.65.
There is no share dividend on what amounts to an EPS Growth stock.
The market cap is big at $4.7 billion. Annual EPS looks to be $0.74 in 2016 and $0.84 in 2017. That's nearly +20% in annual EPS growth, which is excellent. There have been 2 consecutive EPS quarterly surprises, averaging +18%.
Blue Buffalo develops, produces, markets and sells pet food primarily in the United States. The company's product lines include BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom and BLUE Naturally Fresh line. It offers dry foods, wet foods as well as treats for puppies, adult dogs, senior dogs and litters for kittens, adult cats and mature cats.
Blue Buffalo Pet Products, Inc. is headquartered in Wilton, Connecticut.
The company reports on May 10th.
(3) Kimberly Clark ( KMB ) is a Zacks #2 Rank (Buy) stock.
Shares get a Zacks VGM of C, with a Zacks Value of D and a Zacks Growth of C. However, the chart looks great and the Zacks Momentum rating is a solid B.
The stock currently trades at $137 a share, with a steady increase recorded across this volatile open to 2016. The PEG ratio is not cheap. It is 3.15. That poor score garnered the Zacks Value rating of D.
The share dividend offer is +2.68% annually.
The market cap is big at $49.50 billion. Annual EPS looks to be $6.11 in 2016 and $6.60 in 2017. That's +7% annual EPS growth, which is solid and believable. There have been 4 consecutive EPS quarterly surprises, averaging 1.21% each time.
Kimberly-Clark is one of the leading consumer products companies. Its global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott, Kimberly-Clark, Safeskin, Tecnol, Kimwipes and Wypall. Other brands well known outside the U.S. include Andrex, Scottex, Page, Popee and Kimbies.
Kimberly-Clark also is a major producer of premium business, correspondence and technical papers.
Kimberly Clark was founded in 1872 in Neenah, Wisconsin. In 2016, this has become a true multi-national outfit. The firm claims more than 216 locations in 63 countries around the world,
The company reports on April 22nd.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.