No one knows how long the economic pain will last in our current recession. This is particularly true because the COVID-19 pandemic puts us in uncharted waters. So this is a good time to evaluate your holdings and see which stocks should do well in a downturn.
These three companies are offering everyday necessities that people will continue buying, regardless of the state of the economy. Let’s dig in…
Kroger (NYSE:KR), a nearly-140-year-old supermarket operator, has survived world wars, the Great Depression, and numerous recessions. It’s no wonder Kroger does well in these conditions. Demand for groceries (as well as pharmacies and gas stations, which many locations also offer) does not dip when people lose their jobs. In fact, consumers are more apt to eat at home rather than dine out. You can see this by the company’s strong results for its fiscal first quarter (ended May 23). Its same-store sales (comps), excluding fuel, rose 19%. Kroger’s operating profit under U.S. generally accepted accounting principles (GAAP) increased by 47% to $1.3 billion from last year’s $901 million.
Looking further back to the previous recession, Kroger’s comps rose 5% and 2.1% in 2008 and 2009, respectively.
Showing confidence in its future and reflecting its consistent results, Kroger’s board of directors recently raised the quarterly dividend from $0.16 to $0.18, starting with September’s payment, which is a 2% dividend yield at Friday’s closing price. With a payout ratio of 24%, meaning less than one-quarter of the company’s earnings go toward the dividend, Kroger has ample room to pay higher dividends. This also marked 14 consecutive years the company has increased its payout.
2. General Mills
General Mills (NYSE:GIS) is a consumer staples company that sells cereals, snacks, and yogurts under well-known brands like Cheerios, Fiber One, and Yoplait. This is another company that will likely benefit from…
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