By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel consensus is bearish on consumer staples, particularly Hormel (HRL), due to earnings deterioration, high private-label penetration, and currency risks for multinationals like PG and KO. They are seen as capital-preservation plays rather than 'forever' holds.
Risk: Earnings deterioration and high private-label penetration for HRL, and currency risks for PG and KO.
Opportunity: None identified.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Dividend King Hormel is deeply out of favor and working on a turnaround, but it boasts a historically high yield.
Dividend King Procter & Gamble is reasonably priced to a little cheap, and is holding its own in a tough market.
Dividend King Coca-Cola is reasonably priced to a little cheap, and performing relatively well.
Wall Street often moves like a herd, with a big theme leading investors to rush in a single direction. Currently, one of the primary concerns is that consumers are becoming increasingly aware of costs, which is leading to a shift from higher-priced items to lower-cost ones.
That has consumer staples stocks, some of which are seeing this dynamic, to sell off sectorwide. If you are a contrarian, now is a good time to look for buy-and-hold stocks in this historically reliable sector. A good trio to start with, if your preferred holding period is "forever," is Hormel (NYSE: HRL), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO). Here's what you need to know.
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Full disclosure, I recently sold Hormel to capture losses I had so I could offset gains elsewhere in my portfolio. I am actively counting the days until I'm outside the wash sale rule so I can buy Hormel back. That said, Hormel is not performing optimally right now, so there is a reason why the stock is in the doldrums. But there's an important nuance to the story.
Even well-run businesses experience difficult times. In late November 2025, Hormel announced its annual dividend streak was entering its sixth decade. That's a clear sign that management and the board of directors think the future remains bright despite today's tough operating environment.
Indeed, despite the headwinds, Hormel still owns a large collection of category-leading food brands. The board also recently brought in a new CEO to help get the business back on track. Given the dividend track record, it seems highly likely that Hormel will turn its business around before too long. However, if you buy the stock today, you'll get it while it is trading with a historically high 4.9% dividend yield, and key valuation metrics like price-to-sales and price-to-book value are below their five-year averages.
One of the criticisms of Hormel is that its earnings have been weak, declining from $1.47 in fiscal 2024 to $0.87 in fiscal 2025. That's a real negative, even though it seems likely that the company will find its way back to growth again. Procter & Gamble, on the other hand, saw earnings increase 4% in fiscal 2025 and 3% in the first quarter of fiscal 2026. The consumer staples giant is doing just fine as a business, reliably selling its products even amid consumer spending worries.
The truth is, you probably have a favorite toothpaste, deodorant, and toilet paper. Like most consumers, you won't switch unless absolutely necessary. That brand loyalty works in favor of Procter & Gamble even though Wall Street has pushed the price lower, along with the broader consumer staples sector. If you don't mind paying a fair price for a good business, you'll want to jump on Procter & Gamble today.
For starters, the 2.9% dividend yield is well above the 1.1% yield of the market and a touch higher than the 2.7% yield of the average consumer staples stock. But Procter & Gamble's valuation is also quite compelling, with the stock's price-to-sales, price-to-earnings, and price-to-book value ratios all below their five-year averages. The stock isn't as beaten down as Hormel, but it is well worth buying this industry-leading consumer staples company and holding it forever. And for reference, like Hormel, Procter & Gamble is a Dividend King (its streak is 69 years strong).
If I didn't already own direct competitor PepsiCo (NASDAQ: PEP), I would probably buy Coca-Cola today. It has an attractive 2.9% yield. It is a Dividend King with 63 annual dividend increases behind it. And the stock's price-to-earnings and price-to-book value ratios are below their five-year averages. The price-to-sales ratio is roughly in line with its five-year average, so all in all the stock looks fairly priced to a little cheap.
That said, the real attraction is Coca-Cola's business, which is performing fairly well right now. The company's organic sales jumped 6% in the third quarter of 2025, an improvement over the 5% growth in the second quarter. By comparison, PepsiCo, the stock I own, saw organic sales rise 1.3% in the third quarter of 2025, down from 2.1% in the second quarter. There's a reason why PepsiCo's yield is 3.8%.
If you prefer to err on the side of caution, Coca-Cola is the better choice when compared to PepsiCo, despite Coca-Cola's lower yield. That's the kind of risk/reward trade-off you often have to make when investing. I wouldn't advise investors to avoid PepsiCo, but if you are a dividend investor who places a high value on income safety, Coca-Cola's strong performance in the face of a challenging market makes it difficult to ignore this beverage giant.
You may not like all three of these consumer staples makers, but each one has a certain appeal. Hormel is the riskiest of the three, but given enough time, it should be able to get back on track. Procter & Gamble and Coca-Cola both have fairly similar stories, both of which should appeal to even the most risk-averse investors today.
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Reuben Gregg Brewer has positions in PepsiCo and Procter & Gamble. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"These dividend stocks are currently priced as bond proxies, meaning their total return potential is severely limited by stagnant volume growth and the risk of consumers permanently trading down to private labels."
The article leans on the 'Dividend King' narrative, but it ignores the structural headwinds facing consumer staples. While PG and KO offer defensive stability, they are essentially bond proxies in a high-rate environment; their growth is capped by low-single-digit volume expansion and an inability to push price hikes further without triggering consumer revolt. Hormel (HRL) is the real wildcard; the 'turnaround' thesis hinges on operational efficiency, yet the article glosses over the volatility in commodity input costs and the potential for a permanent shift toward private-label brands. These stocks aren't 'forever' holds; they are capital-preservation plays that will likely underperform if the broader market continues to rotate into higher-growth tech or cyclical recovery plays.
The strongest case against this is that these companies possess massive pricing power and scale, making them the only safe havens if a recession triggers a flight to quality and defensive income.
"HRL's 41% EPS collapse signals operational rot that endangers its high yield's sustainability, unlike PG and KO's steadier paths."
The article hypes HRL, PG, and KO as contrarian Dividend King buys amid staples sell-off, but glosses over HRL's alarming 41% EPS plunge from $1.47 (FY24) to $0.87 (FY25), likely tied to persistent supply issues or weak demand—not just 'out of favor.' Its 4.9% yield screams risk, not value, with turnaround hinging on unproven new CEO. PG's 4% FY25 EPS growth and KO's 6% Q3'25 organic sales (vs. PEP's 1.3%) justify 2.9% yields above sector 2.7% avg, but 'below 5yr avg' valuations ignore absolute levels and downtrading margin erosion if consumers stick to private labels long-term. Solid moats, modest appeal—no forever slam dunks.
Against bearishness on HRL, its 60-year dividend streak, recent raise, and category-leading brands provide a wide moat for recovery once headwinds pass, with P/S and P/B at multi-year lows offering deep value.
"Hormel's 4.9% yield is a value trap unless management proves the turnaround within 18-24 months; dividend sustainability is not guaranteed when earnings have halved."
The article frames a contrarian play on beaten-down consumer staples, but conflates 'cheap valuation' with 'good entry.' HRL's 4.9% yield masks 41% earnings collapse (FY2025 vs FY2024); new CEO tenures are binary outcomes, not certainties. PG and KO look reasonable on multiples, but the article ignores why the sector sold off: margin compression from input costs and pricing power limits in a consumer-cautious environment. The 'buy forever' framing obscures that these are cyclical recoveries, not secular growth stories. Dividend safety depends on earnings stabilization—not yet proven.
Consumer staples' defensive moat is real; PG's 4% earnings growth and KO's 6% organic sales growth suggest the worst may be priced in, making these legitimate value plays for income-focused investors with 5+ year horizons.
"HRL's 2025 earnings drop and uncertain turnaround put dividend sustainability at risk, making the 'forever' buy-and-hold case for HRL (and the trio) more fragile than the article implies."
While the article markets HRL, PG, KO as timeless dividend cores, the strongest counter is Hormel. HRL's earnings deteriorated in 2025 and the turnaround is not guaranteed; a 4.9% yield may reflect investors demanding a big safety cushion rather than this being a free lunch. PG and KO look steadier, but their valuations still hinge on pricing power and macro stability; a persistent inflation backdrop or slower consumer spend could sap top-line growth and pressure margins. The piece glosses over macro sensitivities (rates, dollar strength, commodity costs, and payout sustainability) that could derail a 'forever' buy-and-hold thesis.
Against that view, HRL's 4.9% yield may signal investors demanding a cushion for real earnings risk; if the turnaround stalls, the payout could be challenged, undermining the 'forever' thesis for all three.
"The 'forever' dividend thesis for PG and KO ignores the persistent drag of dollar strength on multinational earnings translation."
Grok and Claude correctly highlight HRL's earnings collapse, but they overlook the currency risk embedded in PG and KO. With the dollar remaining structurally strong, these multinationals face significant translation headwinds that will erode reported earnings regardless of organic growth. While the panel focuses on domestic margin compression, the 'forever' thesis ignores that these companies are essentially massive FX (foreign exchange) bets. If the dollar stays elevated, their dividend growth will inevitably decelerate, regardless of operational efficiency.
"Unmentioned private-label penetration poses a structural threat to pricing power and long-term margins for HRL, PG, and KO."
Panel fixates on HRL's 41% EPS drop and PG/KO's FX/margins, but misses private-label share exploding to ~28% of US grocery sales (Nielsen data, up 8pp in 5yrs), eroding branded pricing power across the board—HRL's Applegate/Turkey brands hit hardest. This secular shift, not just cyclical, caps 'forever' dividend growth at low-single digits if unaddressed.
"Private-label pressure is real, but differentiation through portfolio repositioning—not just cost-cutting—determines whether HRL survives and whether PG/KO's 'forever' thesis holds."
Grok's private-label data is critical, but the panel hasn't tested whether HRL/PG/KO can defend margins through *portfolio mix shift* rather than pricing. PG's premium brands (Olay, Gillette) command pricing power; HRL's commodity-heavy exposure is genuinely vulnerable. The 'secular shift' argument assumes static product mix—but these companies actively trade down or innovate. That's the real turnaround question for HRL, not just operational efficiency.
"Private-label growth is a risk, but it won't by itself erase branded pricing power or derail dividend growth; margin resilience depends on mix, pricing strategy, and cost controls."
Main point to Grok: private-label penetration rising is a risk, but it's not a binary 'erode-branded pricing' outcome. The data you cited (PL ~28%) reflects mix shifts, not uniform margin compression; KO/PG/HRL can defend value via premium SKUs, faster product cycles, and tighter SKU rationalization. The real drag remains input costs and currency translation; private-labels are a factor, not the whole risk to dividend growth.
The panel consensus is bearish on consumer staples, particularly Hormel (HRL), due to earnings deterioration, high private-label penetration, and currency risks for multinationals like PG and KO. They are seen as capital-preservation plays rather than 'forever' holds.
None identified.
Earnings deterioration and high private-label penetration for HRL, and currency risks for PG and KO.