Why this could be the best ASX 200 consumer staples stock to buy in May

Here's why I think this stock is a great buying opportunity in May.

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I love a good ASX 200 consumer staples stock investment. The consumer staples sector can offer investors a few unique traits that are invaluable in a stock portfolio. Those include defensive revenue streams, non-cyclical and inflation-resistant earnings and steady dividends.

I own several consumer staples stocks in my own share portfolio. But there is one stock that I don't yet own from this sector that I think could be the best one to buy this May.

It is none other than ASX 200 supermarket operator Woolworths Group Ltd (ASX: WOW).

I have long shunned Woolworths shares as a good investment. This has been largely due to concerns about a relatively high price-to-earnings (P/E) ratio valuation (and correspondingly low dividend yield) compared to the company's arch-rival Coles Group Ltd (ASX: COL).

Put simply, I've always regarded Woolworths as a superior investment to Coles, but Coles as the better buy thanks to its far cheaper valuation.

That is no longer the case. It has been one of the roughest years for the Woolworths share price that we've seen for a very long time in 2024. Year to date, this famous Australian company is currently down a nasty 16.64%. That's even after today's lift of 0.45% up to $31.27 a share (at the time of writing).

Things look even worse for Wooleis over the past 12 months, with the company nursing a loss of 19.5% over this period.

The ASX 200 consumer staples stock has also lost a chunky 25.5% or so since its last all-time high of over $42 that we saw back in 2021. Check that all out for yourself below:

Why is this ASX 200 consumer staples stock looking so cheap?

There's no doubt these falls have been painful for existing Woolworths shareholders to bear. But even so, it has given new investors a potentially lucrative entry point into this company that hasn't been previously available.

To illustrate, around this time last year, we conducted an in-depth comparison of Woolworths and Coles as an investment. At the time, Woolworths shares were trading on a trailing dividend yield of 2.56%. That compared to a 3.62% yield on Coles shares.

Today, Woolies stock has a dividend yield of 3.36%, an increase of 31.2%.

And, as we looked at last week, there are now only a couple of points between both companies' P/E ratios on one current measure.

Now, Woolworths shares haven't fallen so substantially over the past 12 months for no reason. The company didn't exactly pull off a smooth leadership transition when its CEO Bradford Banducci announced his sudden resignation earlier this year. And Woolies' recent results point to the company losing market share to Coles.

Even so, this ASX 200 consumer staples stock remains the dominant player in the Australian grocery and supermarket spaces, commanding the highest market share by some distance.

I don't think there's much evidence that Woolworths is locked in a permanent tailspin against Coles. Thanks to its leading industry position and strong brand power, I expect the company to bounce back eventually.

As such, I think this company's shares are a bargain on the ASX today, making Woolworths the ASX 200 consumer staples stock to buy this May.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. 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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