The Motley Fool

Which Consumer Staples Are Good Value Right Now?

Consumer staples have long been held as a defensive arm of stock investment, with food and drink being seen as recession-proof industries. However, with some pundits south of the border declaring “big food” a bust, let’s see how a few Canadian companies stand up against one American cousin that’s currently the subject of much speculation.

Saputo (TSX:SAP)

The TSX index’s star stock when it comes to dairy, Saputo, is up 1.94% in the past five days at the time of writing. Offering a dividend yield of 1.46% and with an 8.6% expected annual growth in earnings on the table, Saputo would bring defensiveness and diversification to a passive income portfolio light on consumer staples.

Would-be investors will have to weigh up the rest of it stats, which signify an adequate stock all told: a five-year average past earnings growth of 9.5% indicates a fairly pedestrian track record, though it’s suitably positive amid a tough, competitive industry, while a P/E of 23 times earnings and P/B of 3.2 times book suggest so-so valuation.

Rogers Sugar (TSX:RSI)

It’s been a good 12 months for this TSX index sugar giant, with a past-year earnings growth of 47.1% that eclipses its own 7.4% five-year average. While its level of debt to net worth has gone up over the last half a decade from 73.2% to 95.8%, more shares have been picked up than sold by insiders over the last three months, with the past 12 months seeing significant volumes of shares bought by those in the know.

Lassonde Industries (TSX:LAS.A)

Canada’s steady-rolling drinks producer can boast a stable track record, with a 12-month earnings growth of 17.6% almost identical to its five-year average of 16.5%. An okay track record is on display with a debt level of 51% of net worth, while valuation is fair in terms of its fundamentals (see a P/E of 13.3 and P/B of 1.8). A dividend yield of 1.94% meets a 6.6% expected annual growth in earnings for a decent all-round portfolio filler.

Kraft Heinz (NASDAQ:KHC)

Up 2.4% in the last five days, it seems “big food” stock Kraft Heinz is starting to find its way back into the good books of NASDAQ investors after falling off a cliff post-write down. While some doomsayers are writing this stock off altogether, citing changing consumer behaviour, it would be a shame to overlook some strong stats, from a solid five-year average earnings growth of 45.2% to an attractive P/B ratio of 0.8 times book.

While a debt level of 60.3% of net worth is within the danger zone and denotes a so-so balance sheet, a dividend yield of 4.86% is suitably appetizing, while a high 66.4% expected annual growth in earnings puts this stock firmly in the high-growth column.

The bottom line

It would seem that food stocks on the TSX index are safe from the kind of fear currently following stocks like Kraft Heinz around at the moment. While Saputo’s debt 46% of net worth beats that of Rogers Sugar, the latter stock has the better valuation (a P/E of 15.3 times earnings and P/B of 1.8 times book) as well as a higher dividend yield at 5.93%, making the sugar producer one of the strongest choices right now.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Saputo and Rogers are recommendations of Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.