You are what you eat. That said, most medical problems stem from having a poor diet. In fact, obesity has now overtaken tobacco use as the number one cause of preventable death. There are ongoing changes in the food industry, which has created an opportunity for investors to profit off food stocks.
Food stocks, which are categorized in the consumer staples sector, have seen a consistent annual growth rate of between 4% to 9.5%. Some of them, are among the most stable companies in the world, paying out handsome dividends to their investors.
Since 1962, the consumer staple sector has outperformed other industries except for one. Over the last ten years, the consumer staples sector has consistently outperformed the S&P 500 as seen in the chart below.
When Amazon.com announced it was buying Whole Foods in 2017. It caused a shockwave to the industry. As new technology enters the space, new opportunities will emerge to profit off these trends.
Best Food Stocks to Buy- Packaged Food Stocks
General Mills, INC (NYSE: GIS) is an old horse in the race, the company sells its products to over 100 different countries and has been in business for over a century. That said, it’s been paying investors back in the form of dividends- for the last 118 years.
Some of its more popular brands include Betty Crocker, Green Giant, Haagen-Dazs, Cheerios, Yoplait, Pillsbury, and Progresso.
However, the company continues to reinvent itself. For example, in August 2018, it acquired Blue Buffalo Pet Products for $8B. Blue Buffalo is a leader in the natural pet food category.
The move shows the mindfulness of management, and it suggests that the company is willing to diversify to keep its position as one of the most extended income-producing stocks.
Kellogg Company (NYSE: K)
Kellogg’s manufactures and markets ready-to-eat cereal and other breakfast foods. However, over the years, its expanded to other packaged food segments.
Some of its brands include Frosted Flakes, Cheez-It, Pringles, Keebler, Famous Amos, Morning Star Farms, Rice Krispies, Pop Tarts, and Eggo to name a few.
The firm has a market capitalization of about $23 billion, making it a significant player in the food industry. That said, Kellogg’s growth rate has been steady at about 5% annually.
The company’s financial performance is improving as it continues to pay more attention to top-shelf brands such as Pringles.
It’s even making a push into healthy foods and snacks. For example, Its acquisition of RXBAR turned out to be a good bargain.
Kellog’s share price has grown by 33.8% over the last ten years and has seen its dividend increase by 64.7% during the same period.
Best Food Stocks- Confectioners
MONDELEZ INTERNATIONAL INC (NASDAQ: MDLZ)
Now, you may not know the name Mondelez, but you probably know its brands. If you ever had Chips Ahoy or Oreo cookies, then you’ve had a Mondelez product.
That said, its other notable brands include Cadbury, Dentyne, Halls, Honey Maid, Philadelphia cream cheese, Ritz, Nabisco, Premium crackers, Sour Patch Kids, Tang, Trident, Triscuit, and Wheat Thins, to name a few.
Mondelez is one of the biggest food processing companies in the world, with a market cap of approximately $60B.
The company has seen its shares rise by 132.8% over the last decade. Shrewd acquisitions bolster its revenue growth rate, and the company is performing well on margin expansion initiatives, with a forecast of 7% per share earnings over the next five years.
Best Food Stocks to Buy- Grocery Stocks
Amazon (NASDAQ: AMZN)
Amazon made the bold step into the grocery world by acquiring Whole Foods, at $13.7 billion and within days, more than a thousand Whole Food products were added to Amazon.com.
One of the largest companies in the world, Amazon.com is not a pure food play. However, no one can deny its influence on the sector.
The Kroger Co (NYSE: KR)
Kroger may not have the same market presence as Amazon, but it is not ready to lose its position as one of the largest grocery stores, in the United States.
To compete with the mighty Amazon, Kroger has signed a pact with Microsoft, to create a digital grocery store, which will help shoppers to easily navigate through the aisle, while still being in their home and having the convenience of ordering online.
That said, the tech alliance with Microsoft will help Kroger meet its promise to deliver $400 million in operating profits by 2020. Kroger’s ambition and its latest collaboration, are more than a few reasons to be paying attention to this company.
Food stocks often pay decent dividends and provide a steady measure of income to investors. Besides, they are not as volatile as some other stock sectors like biotech and tech. That said, there are plenty of changes ongoing in the food sector. Most notably, Amazon’s entrance in the space. They have made this sector exciting and relevant again.
Are you going to be grabbing any new food stocks? Let me know in the comments below.