2 dividend-paying, millionaire-producing consumer staples stocks

It’s much easier to get rich slowly than it is to get rich quick, and usually much less risky. If you want to build wealth over time, consumer staples stocks should feature prominently in your portfolio. Two reliable consumer staples dividend-paying giants to watch today are PepsiCo (PEP 0.18%) and Hormel (HRL 0.47%). Here’s why you’ll want to consider adding both to your millionaire portfolio right now.

Building wealth isn’t about taking risks, it’s about avoiding mistakes

Before looking at PepsiCo and Hormel individually, it’s important to consider what it takes to build a seven-figure portfolio. There is risk involved, of course, as investing is an inherently risky activity. But the more important aspect of building wealth is actually avoiding big mistakes — the kind that permanently destroy wealth.

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Some things to avoid might include investment fads (meme stocks) or chasing ultra-high returns that eventually get cut (yield traps). It is much easier to build wealth when you buy good companies that trade at attractive prices and then hold them for a long time (decades). That way, you’ll benefit as they grow their businesses over the years.

This is a portfolio approach, so you’ll need more than one investment (perhaps a dozen to 20 stocks). But it’s a much more reliable way to become a millionaire than swinging for the fences.

Hormel and PepsiCo can help round out your portfolio by adding two highly reliable consumer staples stocks. In particular, commodity producers produce products that do not cost a lot of money but are bought regularly. In this case, both companies produce food. You have to eat, and so does everyone else. But why these two food manufacturers?

Pepsico is attractively priced today

To cut to the chase, PepsiCo’s price-to-sales and price-to-earnings ratios are both below their five-year averages today. Meanwhile, the company’s 3.1% dividend yield is above its 10-year average yield of 2.8%. In other words, PepsiCo looks relatively cheap right now.

What you get for a bargain price is a Dividend King that has amassed 52 consecutive annual dividend increases. Only well-run companies can achieve such a number. PepsiCo is the no. 2 in drinks in the back Coca colathe number one player in salty snacks (with Frito-Lay) and has a strong packaged food portfolio in its Quaker Oats business. Given its size, with a market capitalization of $230 billion, as well as its portfolio, PepsiCo is a vital partner for retailers around the world.

To be fair, PepsiCo isn’t firing on all cylinders today. But given the business structure and long-term track record here, investors looking to build wealth in a slow and steady fashion should probably give management the benefit of the doubt and buy while the stock is unloved.

Hormel is experiencing a Category 4 storm

Compared to PepsiCo, Hormel’s recent performance has been downright troubling. It has four headwinds: the difficulty of passing on inflation to consumers, bird flu hitting poultry flocks, a slow recovery from the pandemic in China and the acquisition of Planters just as the snack nut segment began to slow.

Individually, these issues would be nuisances; collectively, they are a big problem. That’s why Hormel’s dividend yield is near all-time highs at 3.5%.

However, taking a contrarian position here makes a lot of sense. For starters, Hormel’s dividend record is even more impressive than PepsiCo’s. Hormel has increased its dividend annually for 58 consecutive years. Meanwhile, the company is known for innovation and has a strong position in the food service space, where its prepared meats help save time and money.

To support this, Planters introduced new products that allowed it to increase market share despite weakness in the nut category. Meanwhile, foodservice sales rose 8% in the first half of 2024, with segment profits up 6%.

Yes, Hormel comes with more warts than some investors would like. But if you can think in decades, not days, this contrarian investment has proven to execute in good times and bad. With a historically high yield, now is a great time to add this food product to your portfolio.

You can’t avoid risk, so focus on smart risk-taking

When working to build generational wealth, you must balance risk and reward. Swinging for the fences can sometimes work, but the risk of losing is huge and the shot can set you back years. A better choice is to focus on trusted stocks like Dividend Kings PepsiCo and Hormel, which have proven they know how to weather tough times so they can thrive over the long term.

Meanwhile, the best time to buy them is when they’re on discount, as fickle Wall Street focuses on what could be short-term downside. Looks like the time is now.