The broader indexes rallied after the election results, closing the week at all-time highs. But plenty of industry leaders were noticeably absent from the post-election run-up.
Here's why Coca-Cola(NYSE: KO), PepsiCo (NASDAQ: PEP), and Procter & Gamble(NYSE: PG) are sitting on the sidelines but are three dividend stocks that could still be worth buying now.
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The consumer staples sector has slowed
The consumer staples sector is having a great year, buoyed by top names like Walmart and Costco Wholesale, which have both crushed the S&P 500 and Nasdaq Composite year to date.
Coke and P&G also hit all-time highs earlier this year, but began cooling in late September. As you can see in the following chart, Coke, Pepsi, and P&G are down over the last three months, while the S&P 500 has soared 12.7%.
So even before the election results came in, all three companies were pulling back from their highs. The simplest reason: earnings weren't great.
Dealing with the same problem
Despite being on track for record profits in 2024, Coke's unit case volumes declined in the recent quarter. Coke had been keeping case volume growth barely positive. Coke has relied heavily on price increases to drive higher earnings. Declining case volumes are a red flag that consumers are resisting price increases and that Coke needs to take action to drum up demand.
Similarly, Pepsi's latest quarter showed volume declines across all its major categories, including the drinks business and Pepsi-owned Frito-Lay and Quaker Oats. Pepsi has been a worse performer than Coke and P&G year to date, namely because it has been facing volume declines longer. However, Pepsi's management is getting creative with new ways to spark demand, such as giving customers more product per bag and increasing the number of small chip bags in variety packs.
P&G's latest quarter also showcased weak sales growth. But P&G's pricing power is simply on another level, as the company is on track for another record year of profits and expects to grow net sales by low single digits. What's more, P&G generates plenty of extra earnings to aggressively repurchase stock at a much higher rate than Coke and Pepsi are capable of at this time. So unsurprisingly, P&G sports the most expensive valuation of the three companies, while Pepsi has the lowest.
Still, disappointing quarters from all three companies don't explain why they missed out on the post-election rally.
Balanced buys that are worth a closer look
The biggest winners after the election results were sectors like financials and industrials, which could benefit from some of the new administration's policies such as less regulation, easier requirements for mergers and acquisitions, and potential subsidies for developing U.S. manufacturing and industrial production. Other sectors that rallied were the usual suspects of technology, consumer discretionary, and communications -- driven by Nvidia, Apple, Microsoft, Tesla, Amazon, Alphabet, and Meta Platforms.
The consumer staples sector tends to do well during times of uncertainty, which there was a lot of leading up to the election. But with the results in, investors seem to be gravitating toward cyclical sectors that could be coiled springs for economic growth.
Long-term investors would do well to avoid getting caught up in short-term market movements or pile into and out of sectors just because they have momentum.
Coke, Pepsi, and P&G stand out as three ultra-safe dividend stocks ideal for risk-averse investors. The companies Dividend Kings -- meaning they have paid and raised their dividends for at least 50 consecutive years. Pepsi's streak is 52 years, Coke's is 62 years, and P&G is one of the longest-tenured Dividend Kings with a 68-year streak. Investors should target these companies to generate passive income or supplement income in retirement, not to try and beat the market over a matter of months.
All three companies sport reasonable valuations and price-to-earnings ratios that are less expensive than the S&P 500. It wouldn't be surprising if Coke, Pepsi, and P&G continue to underperform the broader market in the near term. If that happens, these companies could go from balanced buys to screaming buys that are too cheap to ignore.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, Tesla, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
