As central banks across the globe scramble to tame inflation, investors fear a looming recession. Consumer staples is a sector that often shows resilience during an economic downturn, with shoppers continuing to buy the necessities throughout.
Amid recession concerns, TipRanks insights show analysts are highly bullish on Costa Group Holdings Ltd. (ASX:CGC), Metcash Limited (ASX:MTS), and Ridley Corporation Limited (ASX:RIC).
Why consumer staples shares now?
The consumer staples sector features companies that manufacture and sell products that are always in demand, such as food and other household essentials. As a result, these businesses can fare better than discretionary goods and services. For example, while people may forgo holidays in tough financial times, they’ll still need to have food on the table and feed their pets.
While the she S&P/ASX 200 Consumer Staples (XSJ) index has declined about 10% year-to-date, many feel a recession could soon see a shift in direction.
Let’s take a detailed look at the three ASX consumer staples stocks that analysts think can provide some strong ballast to your portfolio, from both a capital gains and dividend perspective.
Costa Group share price forecast shows big upside potential
Costa Group is a leading global supplier of vegetables and fruits to retailers. The company is perhaps best-known for its avocados. Costa stock currently offers a dividend yield of 4.6%, well above the sector average of 2.2%. The company’s 42% payout ratio suggests a sustainable dividend program.
According to TipRanks’ analyst rating consensus, Costa stock is a Strong Buy based on seven Buys and two Holds. The average Costa share price target of AU$3.22 indicates about 45% upside potential.
Metcash stock offers top dividend yield
The company is engaged in the wholesale supply of food, drinks, groceries, and other household necessities to retailers. Metcash has a long history of paying dividends, with its annual dividend amount per share increasing over the past three years. The stock currently offers an above-average dividend yield of 6.3%. With a payout ratio of only 37%, Metcash’s dividend program looks sustainable.
According to TipRanks’ analyst rating consensus, Metcash stock is a Strong Buy based on four Buys and one Hold. The average Metcash share price prediction of AU$4.10 implies about 5% upside potential.
Ridley Corporation stock offers impressive dividend yield
The company supplies animal feeds and nutritional supplements. Ridley has a long dividend history, and has been paying increasing annual dividends over the past three years. Its next dividend payment date is set for 27 October. Ridley stock currently offers a dividend yield of 3.1%, well above the sector average of 2.2%. Ridley’s modest payout ratio of 31% implies a stable dividend program.
According to TipRanks’ analyst rating consensus, Ridley stock is a Strong Buy based on three Buys. The average Ridley share price forecast of AU$2.20 suggests about 10% upside potential.
Closing remarks
A recession can shake up every sector in the economy. However, sectors like consumer staples have historically provided shelter to investors during economic downturns. According to analysts, Costa, Metcash, and Ridley are not only well-placed to ride out an economic storm, but also offer dependable above-average dividend yields.
