Despite resurging COVID-19 cases, rising inflation, a slowdown in third-quarter GDP growth, and supply chain logjams, retail sales increased 1.7% month-over-month in October, owing to declining jobless claims each week and rising consumer spending ahead of the holiday season.

Major stocks plunged last Friday on concerns over the recent discovery of Omicron coronavirus variant taking a toll on the global economic recovery. This, along with the supply chain constraints and surging input costs, could keep the stock market under pressure in the near term.

Therefore, it could be wise to bet on dividend-paying consumer defensive stocks to hedge your portfolio against a market downturn. The inelastic demand for products makes consumer defensive stocks good bets now. Walmart Inc. (WMT), The Procter & Gamble Company (PG), Costco Wholesale Corporation (COST), PepsiCo, Inc. (PEP), and Philip Morris International Inc. (PM) have the potential to deliver solid returns, dodging the market fluctuations caused by Omicron and high inflation.

Walmart Inc. (WMT)

WMT operates retail, wholesale, supermarkets, other units, and e-commerce websites worldwide. The company operates through three segments ─ Walmart U.S.; Walmart International; and Sam’s Club. In addition, it offers fuel and financial services and related products.

WMT is scheduled to pay a $0.55 quarterly cash dividend on January 3, 2022. The stock pays a $2.20 per share dividend annually, which translates to a 1.52% yield. Its dividend has grown at a 2.1% rate over the past five years.

Following the U.S. Food and Drug Administration (FDA) and Centers for Disease Control and Prevention’s (CDC) authorization of Pfizer-BioNTech’s COVID-19 vaccine for children aged 5-11, on November 3, 2021, WMT and its Sam’s Club subsidiary announced they would administer the vaccine in more than 5,100 pharmacies nationwide. Offering the best services to help minors’ parents regarding the safety and procedures of taking the vaccine, WMT expects to generate good sales in the upcoming months.

For its fiscal second quarter, ended July 31, 2021, WMT’s total revenues increased 4.3% year-over-year to $140.53 billion. The company’s operating income came in at $5.79 billion, representing a marginal rise from the prior-year period. Its adjusted EPS increased 8.2% year-over-year to $1.45. The company had $16.11 billion in cash and cash equivalents as of October 31, 2021.

Analysts expect the stock’s EPS to increase 17% year-over-year to $6.41 in the current year. The consensus revenue estimate of $571.44 billion for the current year represents a 2.2% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. The stock’s EPS is expected to grow at a rate of 8.1% per annum over the next five years. Over the past nine months, the stock has gained 11.5% in price and closed Friday’s trading session at $144.90.

WMT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Stability, and a B grade for Value, Growth, Sentiment, and Quality. Click here to see the additional ratings for WMT’S Momentum.

Of the 40 stocks in the A-rated Grocery/Big Box Retailers industry, WMT is ranked #2.

The Procter & Gamble Company (PG)

Founded in 1837, PG provides branded consumer packaged goods to consumers worldwide. The company operates in five segments—beauty, grooming, health care, fabric & home care, and baby, feminine & family care. Its products are sold through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, and department stores.

PG paid a $0.87 quarterly cash dividend on October 21, 2021. The stock pays a $3.48 per share dividend annually, which translates to a 2.36% yield. The company’s dividend has grown at a 4.9% rate over the past five years.

On September 14, 2021, PG announced a comprehensive plan to achieve net-zero greenhouse gas emissions across its operations and supply chain—from raw material to retailer—by 2040. PG is looking forward to purchasing 100% renewable electricity and leveraging renewable thermal energy at its manufacturing sites. Also, the company is exploring carbon capture technology developed by Twelve, a carbon transformation company, to incorporate CO2 from emissions into ingredients that could be used across its Tide brand. These efforts should enable PG to achieve its interim 2030 goals.

For its fiscal first quarter, ended September 30, 2021, PG’s net sales increased 5.3% year-over-year to $20.34 billion. The company had $10.37 billion in cash and equivalents as of September 30, 2021.

The consensus EPS estimate of $5.92 for the current year represents a 4.9% rise from the prior-year period. Analysts expect PG’s revenue to improve marginally year-over-year to $69.80 billion for the current year. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at a 7% rate per annum over the next five years.

PG has gained 19.4% in price over the past nine months and ended yesterday’s trading session at $147.47.

It is no surprise that PG has an overall B rating, which equates to Buy in our POWR Ratings system.

The stock has an A grade for Stability, and a B grade for Quality. Click here to see the additional ratings for PG’s Growth, Value, Sentiment, and Momentum.

PG is ranked #9 of 70 stocks in the Consumer Goods industry.

Costco Wholesale Corporation (COST) 

COST operates wholesale membership warehouses that offer branded and private-label products in a range of merchandise categories worldwide. The company sells all kinds of food, automotive supplies, hardware, sporting goods, jewelry, electronics, apparel, health, and beauty aids, as well as other goods. It currently operates e-commerce sites and operates 820 warehouses.

COST paid a $0.79 quarterly cash dividend on November 12, 2021. The stock pays a $3.16 per share dividend annually, which translates to a 0.58% yield. The company’s dividend has grown at an 11.9% rate over the past four years.

COST generated net sales of $16.47 billion for the retail month of October, up 19.2% from the prior-year period.COST’s total revenue for its fiscal fourth quarter ended August 29, 2021, increased 17.4% year-over-year to $62.68 billion. The company’s operating income came in at $2.28 billion, up 17.9% from the prior-year period. While its net income increased 20.2% year-over-year to $1.67 billion, its EPS increased 20.1% to $3.76. As of August 29, 2021, the company had $11.26 billion in cash and cash equivalents.

Analysts expect the stock’s EPS to grow 10% year-over-year to $12.20 in the current year. The consensus revenue estimate of $214.28 billion for the current year represents a 9.4% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. Analysts expect the stock’s EPS to grow at a rate of 11.7% per annum over the next five years. Over the past nine months, the stock has gained 65% in price and closed Friday’s trading session at $546.13.

COST’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock has a B grade for Sentiment, Stability, and Quality. Click here to see the additional ratings for COST (Growth, Value, and Momentum).

COST is ranked #20 in the A-rated Grocery/Big Box Retailers industry.

PepsiCo, Inc. (PEP)

PEP operates food, beverage, and snack businesses worldwide. It markets its products through a network of direct-store-delivery, customer warehouse, distributor networks, as well as through e-commerce platforms and retailers.

PEP is scheduled to pay a $1.08 quarterly cash dividend on January 7, 2022. The stock pays a $4.30 per share dividend annually, which translates to a 2.67% yield. The company’s dividend has grown at a 7.6% rate over the past five years.

On October 7, 2021, PEP’s Frito-Lay division announced 2021 site investments to further enable the snack leader’s ability to meet strong consumer demand by funding new manufacturing lines, warehouse expansions, and improving its distribution network. This further allows Frito-Lay to expand the market reach of its products.

PEP’s revenues for its fiscal third quarter ended September 4, 2021, increased 11.6% year-over-year to $20.19 billion. The company’s non-GAAP gross profit came in at $10.82 billion, representing a 9.2% rise from the prior-year period. Its non-GAAP operating profit was $3.24 billion, up 6.5% from the prior-year period. PEP’s non-GAAP net income came in at $2.48 billion, indicating a 7.4% year-over-year improvement. Its non-GAAP EPS increased 7.8% year-over-year to $1.79. The company had $6.51 billion in cash and cash equivalents as of September 4, 2021. Analysts expect PEP’s EPS to rise 13% year-over-year to $6.24 in the current year. The consensus revenue estimate of $78.29 billion for the current year represents an 11.3% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. PEP’s EPS is expected to grow at a rate of 9.8% per annum over the next five years.

Over the past nine months, the stock has gained 24.7% in price and ended yesterday’s trading session at $161.14.

PEP’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

PEP has a B grade for Stability and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see PEP’s Growth, Value, Momentum, and Sentiment grade here.

Of the 36 stocks in the B-rated Beverages industry, PEP is ranked #10.

Philip Morris International Inc. (PM)

PM manufactures and sells cigarettes, other nicotine-containing products, smoke-free products, and related electronic devices and accessories. The company offers IQOS smoke-free products, including heated tobacco and nicotine-containing vapor products, and also develops a pipeline of inhaled therapeutics and respiratory drug delivery. Its popular brands include Marlboro, Parliament, Bond Street, Chesterfield, L&M, Lark, and Philip Morris.

PM paid a $1.25 quarterly cash dividend on September 28, 2021. The stock pays a $5 per share dividend annually, which translates to a 5.64% yield. Its dividend has grown at a 3.4% rate over the past four years.

On September 15, 2021, PM closed its acquisition of Fertin Pharma A/S, a leading developer and manufacturer of innovative pharmaceutical and well-being products based on oral and intra-oral delivery systems, for an enterprise value of $820 million. Fertin Pharma’s expertise is expected to help PM’s transition to building smoke-free products and sustainable business practices to deliver innovative products and solutions focused on self-care wellness.

PM’s net revenues for its fiscal third quarter, ended September 30, 2021, increased 9.1% year-over-year to $8.12 billion. The company’s adjusted operating income increased 9.4% year-over-year to $3.55 billion. While its net income increased 13.9% year-over-year to $2.43 billion, its adjusted EPS increased 8.5% to $1.54. As of September 30, 2021, the company had $4.49 billion in cash and cash equivalents.

Analysts expect PM’s EPS to improve 17.6% year-over-year to $6.08 in the current year. The consensus revenue estimate of $31.23 billion for the current year represents an 8.9% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a rate of 12.2% per annum over the next five years. Over the past nine months, the stock has gained 5.6% and closed Friday’s trading session at $88.68.

PM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

The stock has an A grade for Quality, and a B grade for Stability. Click here to see the additional ratings for PM (Growth, Momentum, Sentiment, and Value).

Of the 11 stocks in the B-rated Tobacco industry, PM is ranked #3.

WMT shares were trading at $142.63 per share on Monday afternoon, down $2.27 (-1.57%). Year-to-date, WMT has gained 0.12%, versus a 25.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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