Top-Three Consumer Staples Stocks That Bring in Big Dividend Yields

The consumer staples sector is home to some of the most well-known dividend growth stocks in the world. In fact, the consumer staples sector has the most Dividend Aristocrats of any individual market sector.

Consumer staples are also appealing stocks for risk-averse investors as defensive industries such as packaged food and beverage and personal care products see steady demand, even during recessions.

The following three consumer staples stocks have high dividend yields above 5%, making them appealing choices for income investors.

1. Altria Group (MO)

Altria MO is a consumer staples giant with a diversified product portfolio. It sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands. It also has a 10% ownership stake in global beer giant Anheuser Busch InBev BUD.

Altria reported solid third-quarter results, driven by the resilience of its smokeable products and the continued market momentum of the on! nicotine pouch brand. The company’s Q3 revenue was $5.34 billion, a 1.3% year-over-year increase, with adjusted earnings per share (EPS) reaching $1.38, exceeding expectations by $0.03.

In the NJOY segment, consumables shipments rose by 15.6% and devices by 100% year over year, reflecting strong demand in the non-smokeable products segment. The NJOY brand captured a 6.2% share in the U.S. convenience market.

Additional earnings-per-share growth can be achieved through cost reductions, and share repurchases. Altria recently announced its "Optimize & Accelerate" initiative aimed at modernizing processes, with projected cumulative savings of $600 million over the next five years.

Furthermore, last quarter, Altria repurchased 13.5 million shares, spending $680 million, and it has $310 million remaining under its repurchase program, anticipated to complete by year-end.

At the same time, Altria continues to invest in new products. It is investing heavily into share repurchases to try to support continued earnings-per-share and dividend-per-share growth. Altria invested billions of dollars in Canadian marijuana producer Cronos Group for a 55% equity stake (including warrants) and a 35% equity stake in e-vapor manufacturer Juul Labs.

Altria stock has a high dividend yield of 7.3%. It ranks very highly in terms of dividend safety because the company has tremendous competitive advantages. It operates in a highly-regulated industry, which virtually eliminates the threat of new competition in the tobacco industry. Altria enjoys strong brands across its product portfolio, including the leading cigarette brand.

As a result, it has pricing power and brand loyalty. In addition, tobacco companies enjoy low manufacturing and distribution costs, thanks to its economies of scale. This has fueled Altria’s tremendous dividend growth, enabling it to boast an impressive dividend growth streak of 54 years.

2. ConAgra Group (CAG)

ConAgra CAG traces its roots back to Gilbert Van Camp’s new canned product — pork and beans — in 1861. Today, the company has well-known food brands like Slim Jim, Healthy Choice, Marie Callender’s, Orville Redenbacher’s, Reddi Whip, Birds Eye, Vlasic, Hunt’s and PAM.

On October 2, 2024, ConAgra reported first quarter results for the period ending August 25, 2024. (ConAgra’s fiscal year ends on the last Sunday in May). 

For the quarter, net sales declined 3.8% year over year to $2.8 billion, the result of a 1.9% negative impact due to price/mix, and a 1.6% decline in volume. Adjusted EPS decreased 19.7% to $0.53, missing analyst estimates by $0.07. At quarter end, the company had net debt of $8.6 billion, and a net leverage ratio of 3.60x.

ConAgra reaffirmed its fiscal 2025 guidance, expecting organic net sales to decline by -1.5% to remain flat compared to FY 2024. Adjusted operating margin is likely to come in between 15.6% to 15.8%, and adjusted EPS is expected to decline from FY 2024 to $2.60 to $2.65.

ConAgra is improving its balance sheet which should help EPS growth, as the company deleverages to reduce interest expense. For example, the company expects interest expense to decline to $415 million in FY 2025 as the company pays down debt. 

This should improve the safety of the dividend. With a payout ratio of 54% expected for 2024, the dividend appears secure. CAG shares currently yield 5%.

3. Kraft-Heinz (KHC)

Kraft-Heinz KHC is a processed food and beverages company which owns a product portfolio that includes food products such as condiments, sauces, cheese and dairy, frozen and chilled meals, and infant diet and nutrition.

The Kraft-Heinz Company reported its third quarter earnings results on October 30. The company reported that its revenues totaled $6.38 billion during the quarter, which was down 2.9% compared to the revenues that Kraft-Heinz generated during the previous year’s period. This was slightly worse than what the analyst community had expected.

Kraft-Heinz generated earnings-per-share of $0.75 during the third quarter, which was above the consensus estimate. Earnings-per-share were up 4% versus the previous year’s quarter, which was a stronger result compared to the previous quarter, when earnings-per-share were down year over year.

Management stated that they see organic net sales declining by around 2% in 2024, while management is forecasting earnings-per-share to come in between $3.01 and $3.07 for the current year. Earnings-per-share are thus expected to grow by around 2% this year.

Even in a low-growth industry, companies can generate positive returns, though. In Kraft-Heinz’ case, there are several avenues for growth the company can pursue. The first factor is international expansion. Market penetration in many emerging countries is lower compared to the more industrial countries. Many emerging countries have huge markets, and they are growing relatively quickly.

Due to steadily-rising disposable incomes in countries such as China and India, more consumers have the means to purchase consumer goods from Western companies such as Kraft-Heinz, which results in growth potential for Kraft-Heinz’ international business.

Another factor for earnings growth is margin expansion. We believe that margins will remain high, and they might rise further over the coming years. Finally, Kraft-Heinz should benefit from debt reduction that results in declining interest expenses.

KHC stock yields 5%.

At the time of publication, Ciura had no positions in any securities mentioned.