It's my view that ASX investors who are looking to brace their portfolios against further geopolitical or economic shocks should resist the siren's song of buying energy shares, oil ETFs or other short-term bets.

Instead, those investors should consider which companies are best placed to protect their earnings bases amid the significant challenges that the world is currently throwing their way.

It's my view that consumer staples stocks are a sector that is best positioned to protect investor capital amid high levels of uncertainty. Consumer staples stocks are companies that produce or sell goods that we tend to need to buy regularly. That includes food, drinks and household essentials, as well as alcohol and tobacco. Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Endeavour Group Ltd (ASX: EDV) are all prominent examples on the ASX.

However, I think an ASX ETF is a better option than a single ASX stock in terms of protecting a portfolio against uncertainty. That's why I think the iShares Global Consumer Staples ETF (ASX: IXI) is a perfect fund for an uncertain 2026.

Why this ASX ETF is an antidote for uncertainty

As the name implies, this ASX ETF holds a basket of global consumer staples stocks. These range from food and drink producers like Coca-Cola Co, Nestle and Cadbury-owner Mondelez International and makers of household essentials like Colgate-Palmolive and Procter & Gamble to staples retailers and grocers like Walmart, Costco Wholesale and Kroger. Even our own Woolworths and Coles feature as holdings.

It's my view that these sorts of companies can ride out economic shocks and inflation better than any other sector. We all need to buy food and household essentials on a regular basis. That means that, although painful to consumers, these companies can effectively pass on higher costs without the threat of significant sales losses.

Even if consumers switch en masse from expensive branded products to cheaper home-brand options, this ASX ETF holds a mix of companies with strong brands (Procter & Gamble, Coca-Cola) and supermarket stores, mitigating this potential trend.

IXI's holdings are also spread across many different markets, also lowering geographic and currency risk to the ASX investor.

Pulling all of these factors together, and I think we have an ASX ETF that is a perfect investment for the uncertain world we find ourselves in in 2026.

The post This ASX ETF is perfect for an uncertain world appeared first on The Motley Fool Australia.

At a time when inflation is running amok, it's worth taking a lesson or two from longtime investors who've seen it all before.

Consider Warren Buffett's thoughts on the matter. When inflation was rampant in 1977, he wrote, "Our acquisition preferences run toward businesses that generate cash, not those that consume it. As inflation intensifies, more and more companies find that they must spend all funds they generate internally just to maintain their existing physical volume of business."

Not surprisingly, some of Buffett's largest and longest-held positions are excellent dividend stocks. Dividend stocks are focused on cash generation, and that protects their businesses during these inflationary periods. They also provide generous passive income. Some of the best are Coca-Cola (NYSE: KO), Kroger (NYSE: KR), and Procter & Gamble (NYSE: PG). Let's take a closer look at each.

One of the best dividend stocks on the market

Berkshire Hathaway has held shares of Coca-Cola for more than 30 years, and it currently owns 9.2% of the stock. The beverage giant makes up 6.8% of the total Berkshire Hathaway portfolio and is its fourth-largest holding.

Coca-Cola is a classic Buffett stock, mostly because of its focus on cash generation and its dividend, which is really a commitment to its own business. The company is a Dividend King, having raised its payout annually for the past 60 years -- even through the massive sales declines at the beginning of the pandemic.

While the company innovates with new products, its well-oiled business churns out cash through its core brands, giving it enough to plow back into the business while maintaining and growing the dividend. Coca-Cola's payout ratio is presently a bit high at 77%, but the company has tons of cash to cover its dividend, which is super-important to management.

KO Payout Ratio data by YCharts

Coke's shares are down slightly this year. At the current price, its dividend yields 3.1%, which should please new investors.

Big supermarkets, lots of cash

Among U.S. supermarkets, Kroger comes in third in size after Walmart and Costco Wholesale (leaving out Amazon as a different kind of business). But unlike the other two, it doesn't follow a discount model; rather, it offers a premium experience through its network of 2,800 stores.

Over the past few years, Kroger has benefited from customers spending on essentials, and it has revamped its digital channels to handle more demand. Revenue has climbed in this environment. 

It's been in the news lately as it has proposed a merger with the next-biggest U.S. supermarket company, Albertsons Companies. The deal is facing regulatory scrutiny as it would combine the two largest non-discount grocery retailers. If it does indeed go through, the newly merged company will likely overtake Costco as the second-largest food retailer in the U.S.

Buffett first took a position in Kroger in 2019. At that time, it was just getting ready to remake itself. What he might have seen then was a foothold in stability. The company paid a dividend but stopped for several decades before resuming it again in 2006, and it's now a growing a reliable dividend, as are all of the stocks on this list.

KO Dividend data by YCharts

Kroger stock is down just under 4% this year, and at this price, the dividend yields 2%.

A solid business with beloved brands

A theme through all of these stocks is a well-established company with well-loved products that bring in tons of cash. Procter & Gamble is no exception. The company owns popular brands, such as Tide laundry detergent and Bounty paper towels. It makes products that people across the globe use every day and frequently purchase.

Buffett first came to own its shares in 2005 through Berkshire Hathaway's acquisition of the Gillette razor company. Procter & Gamble is another example of a company with slow but consistent growth and the ability to keep producing sales well into the future. 

Inflation has been hitting Procter & Gamble's margins and profits, and volume was down in the company's 2023 fiscal first quarter (ended Sept. 30).

The company has been increasing some of its prices, taking the risk that some customers will head toward discount brands. But management noted that 26 of 50 global brands maintained or increased market share in the latest quarter, which was the first to really reflect high inflation.

It expects profitability to suffer in the near term and is counting on brand power to carry it through. 

The company's stock is down 21% this year, and its dividend yields 2.8% at this price.

KO Dividend Yield data by YCharts

Procter & Gamble is also a Dividend King, and it has one of the longest dividend-raise streaks on the market, at 66 years. It's as reliable as you can get for steady and growing passive income.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The best Warren Buffett stocks you can buy with huge passive income potential appeared first on The Motley Fool Australia.