S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
Critical asset just had biggest fall on record (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
South Korean doctors hold massive anti-government rally over medical school recruitment plan
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
Critical asset just had biggest fall on record (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
South Korean doctors hold massive anti-government rally over medical school recruitment plan
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
Critical asset just had biggest fall on record (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
South Korean doctors hold massive anti-government rally over medical school recruitment plan
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
Critical asset just had biggest fall on record (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
South Korean doctors hold massive anti-government rally over medical school recruitment plan

Are These Consumer Staples Too Cheap for Investors To Ignore?

Consumer staples graphic in style of stock ticker with skyscraper in background

Key Points

  • Consumer Staples stocks are down compared to the broad market, but that may be about to change. 
  • These stocks offer value and yield and have a solid outlook for sustained performance and payouts. 
  • The most undervalued names in the group stand to offer the most significant returns over the next decade. 
  • 5 stocks we like better than Altria Group

Consumer staples NYSEARCA: XLP stocks are down 6.5% from their July highs and more than 10% from the 2022 peaks and may move lower. The caveat is that the sector is trading near the bottom of a range, above critical support, and there are signs of bullish activity in the market. This suggests a buying opportunity, but which are the best to buy? The stocks on this list turned up on a screen using Marketbeat's Stock Screener and include the most undervalued, highest-yielding consumer staples names with double-digit upside potential. 

The takeaway is that these stocks may be too cheap to ignore. With the Fed nearing the peak of the rate-hiking cycle, the market-beating yields and outlook for distribution growth and capital appreciation provide an opportunity that will outpace the bond trade and the broad equity market over the next decade. 

Altria - A Cash Flow Machine and Dividend King 

Altria NYSE: MO isn't an easy stock for every investor to hold, but let's face it: the company makes money and returns capital to shareholders, and it is unlikely to go out of business soon. Regarding its investment status, the stock trades at less than half the broad market average, about 8.5X its earnings outlook, and pays more than 9% in yield, with shares down more than 20% from the 2022 highs. 

Takeaways from the last earnings report include a widening margin and better-than-expected earnings despite a downtick in volume. Guidance was reaffirmed for EPS to grow by low single digits in 2023; analysts expect the bottom line growth to accelerate to the mid-single digits next year. Altria pays about 75% of its earnings, which is high but offset by the EPS growth outlook. The question is if the company can shift to cannabis successfully. Efforts to date have met with losses, but that is due primarily to the state of federal legalization. 

MO stock chart

Medifast - Slimmed Down to an Attractive Valuation 

Medifast NYSE: MED produces weight loss and healthy-living food products and has shed much of its valuation. The stock is down 75% from its highs, offering another deep-value high-yield opportunity. Declining revenue is a primary cause of the share price decline, but the takeaway is that the company generates revenue, makes profits, and pays a healthy dividend. Trading at 9.5X earnings, it pays over 8% in yield, and the payout is $6.60 annually or about 49% of earnings, which is low enough to allow distribution increases. The company has increased the distribution for seven years and recently declared the Q3 payment in alignment with the trend. The next distribution increase is due in Q1 2024 but may not be a large one. 

MED stock chart

Kraft Heinz - A Big Ship to Turn Around 

Shares of Kraft Heinz NASDAQ: KHC are trading near the bottom of their range due to tepid performance relative to turn-around expectations. The salient point is that the turnaround is still in effect, and growth is expected this year and next. The growth is centered in emerging markets, expected to outperform the S&P 500 next year and aids balance sheet and FCF improvements. The stock trades below 12X earnings, the very low end for packaged food companies, and pays more than 4.5% in yield. The payout ratio is below 55%, which suggests distribution increases are possible, but they should not be expected soon. The company may resume distribution increases in the future but is focused on growth and execution at this time. 

KHC stock chart

Archer-Daniels-Midland: The Infrastructure of Industrial Food 

Archer-Daniels-Midland NYSE: ADM handles and produces food and industrial products from agricultural commodities. Among the many products are sweeteners, soybean products, peanut derivatives, flavorings, extracts, and oils. The company is a Dividend Aristocrat with nearly 30 years of consecutive increases in the dividend history. It trades at a low 11X earnings and pays over 2.25% in yield. The yield is the lowest of any stock on this list but comes with the lowest payout ratio, 28%, and the longest runway for dividend growth, making it a great choice for younger investors. As it stands, the company is raising the distribution at a pace greater than 5%, enough to outpace inflation. 

ADM stock chart

→ Critical asset just had biggest fall on record (From Stansberry Research) (Ad)

Should you invest $1,000 in Altria Group right now?

Before you consider Altria Group, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Altria Group wasn't on the list.

While Altria Group currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 AI Stocks to Invest In: An Introduction to AI Investing For Self-Directed Investors Cover

As the AI market heats up, investors who have a vision for artificial intelligence have the potential to see real returns. Learn about the industry as a whole as well as seven companies that are getting work done with the power of AI.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Archer-Daniels-Midland (ADM)
4.4488 of 5 stars
$54.24+2.1%3.69%7.55Reduce$67.08
Kraft Heinz (KHC)
4.763 of 5 stars
$35.13-0.4%4.55%15.21Moderate Buy$40.57
Medifast (MED)
4.5842 of 5 stars
$40.44+0.9%16.32%4.44Hold$61.00
Altria Group (MO)
4.1409 of 5 stars
$40.86-0.1%9.59%8.94Hold$47.22
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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