Consumer Staples Gaining Traction Amid Tech Sector Decline

Consumer staples stocks are gaining attention as tech falters. Investors seek stability in companies like PepsiCo and Hormel Foods, despite varying performances. With slower growth rates, opportunities arise for long-term dividend investors.

Date: 15-03-2025

AI Rating: 6

Market Movements: Since early 2024, there has been a notable shift from technology stocks back towards consumer staples as investors seek safer options amidst market volatility.

PepsiCo Insights: PepsiCo reported a 2% organic sales growth in 2024, with adjusted earnings increasing by 9%. However, these numbers represent a slowdown compared to previous periods. The projections for 2025 indicate low single-digit organic sales growth and mid-single-digit adjusted earnings growth. Although PepsiCo's stock remains down about 20% from its peak, it offers a high dividend yield of 3.5%, making it appealing for dividend investors.

Hormel Foods Overview: Conversely, Hormel Foods has encountered challenges, including a weak fiscal 2024 and a mixed Q1 for fiscal 2025 where organic sales only increased by 1% while adjusted earnings decreased by 11%. The company faces several headwinds, including slow price adjustments and operational issues. Despite these factors, Hormel has maintained its dividend increase streak for 59 years, and the dividend yield has risen to 3.8% due to stock depreciation.

Investment Potential: Overall, while PepsiCo shows resilient business fundamentals, its growth is moderating. Hormel Foods, on the other hand, might be viewed as a turnaround candidate amidst its struggles. Investors looking for dividends might find opportunities in both stocks, but must also consider the inherent risks involved with Hormel's current financial performance.

Stocks: PEP HRL