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15 Best Consumer Staples Stocks for 2021

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24.11.2020

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Consumer staples stocks held up well in 2020, and for good reason. When the worst of the pandemic hit in March, Americans stocked up on toilet paper and bottled water, with social media full of pictures showing empty grocery store shelves.

As we look to 2021, however, investors should be more discerning about what stocks they're putting in their shopping carts. While the pandemic still is raging in many areas of the U.S., with record cases and serious strains on the healthcare system, there is also favorable news about research into vaccines that should give everyone hope that next year will be much better – for our health, for our economy and for our sanity.

That's not necessarily welcome news for every company that sells household necessities, however. If you're looking to reposition your cash in consumer staples, then, you may want to look beyond 2020's "stay-at-home trade" names that did well but might be running out of gas.

Here are 15 of the best consumer staples stocks for 2021. Each one has plenty to offer in the coming year, and isn't simply dependent on pandemic stockpiling to boost performance. Better still, Wall Street's analyst community rates each of these stocks a Buy or Strong Buy on average. Average analyst scores are listed for each stock; any score below 2.5 means that analysts, on average, rate the stock as being Buy-worthy. The closer a score gets to 1.0, the stronger the Buy recommendation.

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Comprised of the domestic tobacco operations of what was once Philip Morris, Altria Group (MO, $39.94) is the brand behind Marlboro cigarettes, Copenhagen and Skoal chewing tobacco and Black & Mild cigars. It also owns Ste. Michelle wineries. Collectively, these offer a reliable backbone of revenue.

Altria's stock took its lumps in 2020, even though stressed-out Americans continued to indulge during the pandemic. But it could be one of the best consumer staples stocks of 2021 thanks to its big strategic investments in key growth markets.

This includes a stake in mega-brewer Anheuser-Busch InBev (BUD), cannabis firm Cronos Group (CRON) and vaping giant Juul Labs, as well as "nicotine pouch" manufacturer Burger Group, which will operate under Altria's new Helix Innovations subsidiary. These pouches allow consumers to enjoy varying doses of the drug in cigarettes without any chewing, spitting, smoking or odor.

Altria faces several headwinds, of course, including the basic fact that cigarettes are unhealthy. But with a generous 86-cent quarterly dividend that has been increased at least once annually for more than 50 years but still remains less than 75% of earnings, clearly management knows how to navigate these low-growth waters.

And looking forward, the strategic investments in several high potential areas, including vaping and cannabinoids, could really pay off. With a dividend yield of well more than 8% at present, investors have plenty of reason to sit on MO stock in 2021 and patiently wait for this long-term strategy to pay off.

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Costco Wholesale (COST, $381.12) has long defied the general downtrend for retailers for a host of reasons.

For starters, its bare-bones wholesaling operation doesn't require the same attention to detail in its storefront. Warehouses in the suburbs are in fact the ideal over chic urban real estate, and its dominant discounting model has won it tremendous loyalty among frugal shoppers.

It also has tremendously reliable cash flow when compared with other retailers. Consider that with some 58 million paid members at roughly $60 per pop in annual dues, COST also enjoys a robust $3.5 billion in annual sales rolling in simply from renewals.

It should be no surprise, then, that Costco has not just weathered the pandemic, but thrived amid it. Since the wholesaler provides staples and groceries it has seen the same uptrend as other stores in this category – but as it also sells items like flat-screen TVs and propane grills that have been in high demand amid the stay-at-home trend. As a result, COST stock has surged almost 30% this year compared with just under 10% for the S&P 500 in the same period.

As is typical, however, this growth isn't just a flash in the pan for Costco. Looking to fiscal 2021, the company expects revenues to grow by a little under 10%, and earnings to expand by low double digits. That means these gains are sticky, and part of a sustained uptrend.

If you're looking to rotate out of fashionable "stay-at-home" e-commerce plays and into consumer staples stocks in 2021, COST might be a good alternative right now.

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Switzerland-based Nestle (NSRGY, $114.25), founded in 1866 and one of the biggest consumer staples stocks on the planet, is a standout example of a reliable but profitable investment.

Shares admittedly dipped about 20% for a week or two during the worst of the market volatility in March, but they quickly snapped back to regain that lost ground and steadily march higher. In fact, NSRGY is up against all-time highs after a good performance in 2020.

But the real story here for new investors isn't the recent performance of its world class product portfolio, which includes Gerber baby foods, Purina pet products and Stouffer's frozen foods, as well as iconic Nestle chocolates, and Nescafé and Nespresso coffee products. The bigger news is that more recent products are catching on at a rapid pace – particularly those under its supplements and health nutrition lines. The CEO recently told Bloomberg this unit "is going to be one of our key growth drivers" with 2021 revenue of more than $4 billion – double what it was just five years ago.

Putting its money where its mouth is, Nestle has also embarked on a flurry of recent acquisitions that include six health-related nutrition and supplements companies since Jan 1. The most recent was a $950 million deal for Freshly, a leading provider of healthy direct-to-consumer prepared meals.

As recent healthy diet trends have worked against some legacy brands that haven't evolved with consumer tastes, Nestle is not just keeping up but blazing a trail for the future. This is great news for investors, and a sign that the nice pop seen from 2020's stay-at-home craze might only be the beginning for NSRGY.

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