Although I try to diversify my portfolio in different sectors, consumer staples have my preference by a distance. This for a couple of reasons;
They are more easy to understand and to forecast in my opinion. In general, earnings are pretty stable and tend to go up over time. The sustainability of the business is more easy to predict. I guess those are a couple of the reasons why consumer staples companies tend to trade at higher valuations than other stocks.
They give me peace at mind. Knowing every day millions or even billions of people are using “my” products keeps worries at bay. It makes me sleep like a baby at night. Every time I see people smoking Marlboro, spraying Axe, eating Ben & Jerry’s or drinking Budweiser, I smile a little. Good or bad times, consumer products will be in demand.
Maybe one of the reasons I like them is because of my own cost-cutting mindset. I don’t spend much (or even any) money on stuff I don’t need. First of all because it’s always in my way, second because I simply can’t cut costs on hygiene, food or drinks. If your paycheck would decrease 10% tomorrow, would you stop drinking Coke or stop showering? I hope not.
Last week I was checking out General Mills’ website. They have been paying a dividend for 117 consecutive years. This is simply lit. I can’t imagine much companies in other sectors being able to show a comparable dividend track record. What’s not to love about this? Your grandgrandchildren will be grateful for this.