These stocks often offer stability and consistent dividends, making them attractive to risk-averse investors. Consumer discretionary, however, tend to rally when times are good, and the U.S. economy has gone from strength to strength recently.
This article will explore more defensive, dividend-based companies, as well as those that deploy capital in the aims of delivering capital appreciation for investors.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG), as a consumer staples giant, offers a diverse portfolio of essential household products, including brands like Tide, Gillette and Pampers.
P&G’s products often generate several times more annual revenue than its nearest competitors, thanks to the company’s significant investments in research and development, marketing and artificial intelligence. The company’s size allows it to maintain a competitive edge through leveraging its relationships with retail partners
The main reason why investors should consider PG as one of those consumer stocks to buy is due to its strong dividend. P&G’s payout ratio is 60.51%, and it has increased its dividend for 52 consecutive years.
PG is one of my favorite consumer discretionary stocks €” it offers good income with low volatility and it has a great mix for conservative investors.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is a global fast-food chain that has demonstrated resilience during economic downturns. The company’s strong brand recognition sets it apart, and I feel that its shares have now entered a buying zone.
The company plans to introduce more deals, including a $5 meal deal, to address the slowdown in store traffic caused by inflation-weary customers, and its stock price has fallen around 12% year-to-date.
Like PG, MCD is also a low-volatility blue-chip stock that should be worth of investors’ attention. It offers a dividend yield of 2.54%, with a quarterly dividend of $1.67 per share.
McDonald’s payout ratio is 53.84%, and it has increased its dividend for about 16 consecutive years. The company also has a buyback yield of 1.61%.
I believe that MCD could be a great addition to one’s portfolio if investors seek a strong economic moat above all else in the consumer sector.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) has expanded into various consumer-related sectors, such as streaming services, grocery delivery.
Furthermore, Amazon’s investments in AI startups like Hugging Face and Anthropic, along with the development of its own AI chips €” Trainium and Inferentia €” and a planned $11 billion investment in data centers, means that it could continue to dominate the e-commerce landscape, as well as make further inroads into the higher margin consumer businesses.
Some analysts, including chartist Bruce Kamich, are increasingly bullish on AMZN’s future prospects, and I agree with his sentiment. Kamich’s point-and-figure chart calculations suggest price targets of $199 and $223 for Amazon shares. However, he cautions that if the stock trades below $166, the daily price target may weaken.
AMZN’s shares are significantly below their all-time high, and I believe that it will be the big FAANG stocks like AMZN that will be the primary beneficiary of the ongoing AI revolution, of which AMZN has only just started to tap into.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.