Consumer staples are considered more defensive than many other market areas since they offer "staple goods," which is undoubtedly appealing after seeing some of the recent carnage in high-growth stocks. It's also worth noting that money has recently been rotating into the sector, which could be a sign that investors are flocking to safety and out of riskier assets, a trend that could continue next year.
If you are interested in some of the best consumer staples names to consider for 2022, check out these three stocks below:
1. McDonald's Corporation
When it comes to owning consumer staples stocks, investors should focus on successful companies with products that are sold all over the world and see continuous demand, i.e., McDonald's (NYSE:MCD). That's the case with McDonald's Corporation, which is the largest fast-food restaurant company in the world and a market-leading consumer staples stock trading around its all-time highs.
The company faced many challenges during the pandemic. Still, investors should feel confident that McDonald's is adapting well to how the quick-serve restaurant industry and consumer preferences evolve.
For example, McDonald's has invested heavily in expanding its digital presence and has rolled out a mobile application and self-order kiosks in certain restaurants. The company also has expanded its delivery capabilities, with home delivery available in roughly 80% of McDonald's locations.
While some investors might be worried about rising commodity costs and supply chain issues, the fact that McDonald's recently raised its menu prices by 6% should help to ease those concerns. Finally, a 2.21% dividend yield and the fact that McDonald's is a dividend aristocrat make it the type of core holding that investors can rely on for years to come.
2. PepsiCo
Another impressive consumer staples stock that investors should have their eye on in 2022 is PepsiCo (NASDAQ:PEP). As a major international producer of branded beverage and snack food products, this company offers defensive qualities and organic sales growth upside in the coming years.
With plenty of recognizable brands, including Pepsi, Mountain Dew, Gatorade, Doritos, Lays, and Quaker, along with a strong manufacturing and distribution network, this is a business model that investors can count on through thick and thin. PepsiCo recently reported Q3 revenue of $20.2 billion, up 11.6% year-over-year, which is undoubtedly impressive given that the company has increased its prices.
While some investors might think that Pepsi is all about beverages, it's important to note that its snack food brands Frito-Lay and Quaker account for over half of the company's sales. Orders from restaurants, stadiums, and more should also rebound strongly in 2022 as the impacts of the pandemic continue to wane.
There's also a lot to like about the company's strong balance sheet, as PepsiCo ended Q3 with $6.5 billion in cash and short-term investments. Finally, a 2.61% dividend yield and the company's goal of $1 billion in annual cost savings and productivity gains through 2023 make this consumer staples stock sweeter than your favorite soft drink.
3. Constellation Brands
Beer, wine, and spirits are more great examples of the type of product that has stable demand year in and year out. It's safe to say that America loves booze, which makes Constellation Brands (NYSE:STZ) a great company to look at as we head into the new year.
It's the largest multi-category alcohol supplier in the United States and also an intriguing play on the future of the cannabis industry, as Constellation Brands has a stake in Canopy Growth (NASDAQ:CGC), the largest cannabis producer in Canada.
While the company missed its Q2 EPS consensus estimates, investors should be impressed by the fact that Constellation's Q2 comparable sales increased by 5% to $2.37 billion. The company's beer segment contributed significantly to this boost and could be a strong growth driver in 2022 and beyond.
It's also worth noting that Constellation Brands has a dominant market position in Mexican beer imports, including Modelo Especial, the second-largest U.S. beer brand by total sales. Constellation Brands' stock recently reclaimed the 200-day moving average, which could be a great entry point for long-term investors.