Packaged Foods equities and the broader Consumer Staples sector have historically outperformed the broader market during recessions, as investors seek safety in more defensive, higher-yielding assets.
Importantly, the current leverage ratios of Packaged Food companies stand at a historically high level and we think some may have difficulty maintaining or increasing their dividends in the event of recession after analyzing the dividend history, financial leverage, organic growth and payout ratios of each.
Based on our analysis, we think MKC, TSN and SJM are best positioned to withstand a recession, followed by MDLZ, HRL, HSY and GIS. Conversely, in order, KHC, K, CPB and CAG screen as the least favorably positioned.
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