Why I like ASX consumer staples shares in the current climate

The products offered by ASX consumer staple shares continue to be needed regardless of what state the economy is in. Here are 3 I like…

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asx consumer staple shares represented by shopping trolley filled with essential grocery items

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In my view, ASX consumer staple shares represent a solid investment during times of economic uncertainty and market volatility. Consumer staples companies sell products that people use everyday. These include things like durables, food, beverages, tobacco, household goods and personal products. 

In this article, I take a closer look at three consumer staple companies with solid track records and trusted brands.

Woolworths Group Ltd (ASX: WOW)

Woolworths operates retail stores throughout Australia and New Zealand. Currently, Woolworths supermarkets and Metro food stores number over 1,000 across the country. In New Zealand, the group operates over 180 supermarket stores under the Countdown brand. The other major chain that Woolworths owns and operates is the Dan Murphy’s brand. This, combined with BWS, Cellar Masters and Langtons, numbers above 1,600 stores as well.

Woolworths provides consumer staples and its share price has held up well during the recent coronavirus crisis.

Let’s take a closer look…

Woolworths share price

The Woolworths share price hit an all-time high on 20 February 2020, reaching $43.96. The coronavirus pandemic initially hit the company hard, causing its share price to fall to a low of $32.12 by 13 March, less than one month later. Following this, Woolworths shares have had a steady recovery, moving from $32.12 up to $38.50 at today’s price.

I think the fact that the Woolworths share price has held up in the current climate is, in part, due to its consumer staple product base. No matter what’s happening with the economy, people still need essential products and Woolworths can provide almost all of them. Even with the pandemic still in play, overall the Woolworths share price is up 6.5% in 2020.

Dividends

Woolworths has a long history of paying solid dividends, notwithstanding the fact these have fallen lower recently. If we take a look at ten years ago, Woolworths’ average dividend yield was over 4%. Today, the company’s dividends offer an average yield of around 2.5%. Despite this, I believe Woolworths is such a stable investment that its dividends only add to its appeal for investors.

Blackmores Limited (ASX: BKL)

Blackmores develops, sells and markets natural health products for both humans and animals. It operates in Australia, New Zealand, Asia and various other locations internationally. Blackmores’ product suite includes vitamins, minerals, herbs and other supplements. The company’s range of products is vast and assists with a variety of health-related concerns such as arthritis, muscle strength, brain health, cold and flu, immunity, digestive health, eye health and more. With such a diverse array of products, I believe Blackmores can appeal to customers across a broad cross section of markets. To me, this makes the company a clear member of the ASX consumer staple shares cohort. It provides products that people rely on, regardless of the economic climate.

Blackmores share price

Like many companies on the ASX, the pandemic hit the Blackmores share price hard in the early months of this year. Between 6 February and 13 March, a period of a little more than 30 days, the Blackmores share price fell from $95.68 down to $59.84. However, as with other consumer staple companies, the Blackmores share price quickly recovered up to more than $80 by April. Unfortunately, in the second half of the year, the company’s shares have consistently fallen, all the way back down to $66.18 at the time of writing.

Considering how long this brand has been around and what a trusted name it has in the market, I’m inclined to think the Blackmores share price is a deal at current prices and can only get better as the economy improves. Maintaining good health is something that most people regard as a priority and I feel this is only likely to become more widespread into the future. So whilst Blackmores may not provide critical health services like hospitals, I still believe its offering can be regarded as a consumer staple in most climates. Blackmores does not currently offer a dividend.

Inghams Group Ltd (ASX: ING)

Inghams may seem like a specialist provider, however it is still considered a consumer staple in my books. This company produces and sells chicken and turkey products in Australia and New Zealand. Additionally, it has a business within the stock feed niche, providing food to poultry, swine, dairy and equine producers. Having been around for more than 100 years, Inghams was founded in 1918 and is, I believe, a trusted and well-known brand in the Australian and New Zealand marketplaces.

Inghams share price

The Inghams share price also suffered during the initial stages of the coronavirus pandemic, falling from $3.77 down to $3.03 over a period of around one month. However, the share price has remained relatively stable since then, fluctuating between approximately $3.00 and $3.50. Closing today’s trade at $3.10, I consider Inghams to be a strong brand and a stable stock to invest in.

Dividends

One thing to note about Inghams is that it pays a comparatively high dividend, with a yield of 4.58%. Although Inghams has only been paying dividends since 2017, it has maintained a fairly reliable yield over time. Its first dividend, issued in 2017, represented a 3.3% yield. Since then, Inghams dividends have fluctuated between 3% and 5.8%.

ASX consumer staple shares summary

Consumer staple shares might not be considered the most exciting stocks on the market. However, they are frequently associated with the older, established and more trusted brands in the market. The great thing about consumer staples is that they continue to be needed, no matter what state the economy is in. For me, this makes them a far more attractive option for longer-term investments. 

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Motley Fool contributor glennleese has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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