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3 Consumer Defensive Stocks for the Value Investor

·4 min read

If you want to make your portfolio more resilient to recessions, the following defensive stocks may be suitable options. These businesses have historically continued to generate earnings and dividends during hard economic times as they offer goods and services on which people do not typically cut their spending even in periods of financial distress.

Furthermore, as of the time of writing, Wall Street sell-side analysts have issued positive recommendations for them.


Philip Morris International Inc,

The first stock investors could be interested in is Philip Morris International Inc. (NYSE:PM), a New York-based tobacco giant, maker of one of the world's best-selling and best-known cigarette brands Marlboro.

For the past five years, the earnings per share excluding non-recurring items (NRI) has grown by 6.10% annually, while the dividends per share have grown by 3.6%.

The company's balance sheet is moderately strong, as evidenced by a GuruFocus financial strength rating of 5 out of 10. The rating is driven by an Altman Z-Score of 4.66, meaning the company is in safe zones.

In terms of the profitability of its operations, a GuruFocus rating of 8 out of 10 indicates that the business generates the cash flow to support ongoing operational needs, service all debt, fund growth and return cash to the shareholders.

The share price closed at $97.15 on Friday for a market capitalization of $150.60 billion, a price-earnings ratio of 16.69 and a trailing 12-month dividend yield of 5.15%. The industry has a median of 12.49 for the price-earnings ratio and a median of 5.32% for the dividend yield.

3 Consumer Defensive Stocks for the Value Investor
3 Consumer Defensive Stocks for the Value Investor

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $109.17 per share.

Vanguard Group Inc. is the largest top fund holder of Philip Morris International Inc., owning 8.30% of the tobacco giant's total outstanding shares. BlackRock Inc. and Capital World Investors follow, holding 6.23% and 5.18%, respectively.

Tyson Foods Inc.

The second stock investors could be interested in is Tyson Foods Inc. (NYSE:TSN), a Springdale, Arkansas-based global food company that supplies beef, chicken and pork products as well as processed, fresh and refrigerated food products to retailers and wholesalers.

For the past five years, the EPS without NRI has grown by 9.40% annually, while dividends have grown by 24.20% each year.

GuruFocus gave a financial strength rating of 7 out of 10 to the company, clearly indicating that the balance sheet of Tyson Foods Inc. is robust. The Altman Z-Score of 3.99 indicates a safe financial situation.

The profitability rating is 9 out of 10, meaning the business is highly efficient at raising cash to support day-to-day operations and repay lenders while financing growth and returning cash to shareholders.

The stock traded at $88.01 at close on Friday for a market capitalization of $31.82 billion, a price-earnings ratio of 7.92 and a trailing 12-month dividend yield of 2.07%. The industry has a median of 17.33 for the price-earnings ratio and a median of 2.28% for the dividend yield.

3 Consumer Defensive Stocks for the Value Investor
3 Consumer Defensive Stocks for the Value Investor

On Wall Street, the stock has a median recommendation rating of hold with an average target price of $99.42 per share.

Vanguard Group Inc. is the largest top fund holder of Tyson Foods Inc., owning 10.28% of the companys total outstanding shares. BlackRock Inc. is second with 5.96% and State Street Corp. follows in the third position with 4.03%.

Dollar General Corp

The third stock investors could be interested in is Dollar General Corp. (NYSE:DG), a Goodlettsville, Tennessee-based owner and operator of 18,190 discount stores in 47 states in the U.S. where consumers can purchase a variety of staple products.

For the past five years, the EPS without NRI has grown by 19.30% annually, while dividends have grown by 11.10%.

GuruFocus assigned a financial strength of 5 out of 10 to the company's balance sheet. This means that the financial health of Dollar General's business is pretty solid, with an Altman Z-Score of 3.37.

The profitability rating of 9 out of 10 implies efficient operations in generating cash to meet the day-to-day requirements of running operations, developing growth projects, meeting financial obligations and returning cash to shareholders.

The stock traded at $248.43 at close on Friday for a market capitalization of $56.39 billion, a price-earnings ratio of 25.48 and a trailing 12-month dividend yield of 0.78%. The industry has a median of 16.33 for the price-earnings ratio and a median of 2.29% for the dividend yield.

3 Consumer Defensive Stocks for the Value Investor
3 Consumer Defensive Stocks for the Value Investor

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $256.74 per share.

Price T Rowe Associates Inc. is the largest top fund holder of Dollar General Corp, holding 8.45% of the company's total outstanding shares. BlackRock Inc. and Vanguard Group Inc. follow, holding 8% and 7.93%, respectively.

This article first appeared on GuruFocus.