Hunting for Reliable Yield? Two Stocks to Consider

The euro crisis is back. (In fact, it never went away.) And investors are doing the unthinkable… In search of safety, they’re selling stocks and flocking to U.S. Treasury bonds. And the rush of buying on Monday pushed the yield on 10-year Treasuries down to a paltry 3.08%. Now, I get that people are scared. But I don’t care how bad the situation gets in the eurozone. The last thing I’d be buying is U.S. Treasuries. Instead, I’d be scooping up shares of companies in the consumer staples sector. Here’s why… Don’t Put a Premium on a Government Guarantee The main selling point for Treasuries is that they’re backed by the full faith and credit of the U.S. government. In other words, they’re supposed to be safe. But we can say the same about consumer staples stocks. After all, no matter what’s happening in the world, demand for food and and products like bathroom tissue, diapers and paper towels will continue. I mean, I didn’t stop buying diapers for my toddler because of the housing slump. I never stopped eating during the recession (we Italians love to eat, after all). And I didn’t stop using paper towels the day Lehman Brothers went under, either. Did you? I didn’t think so. As you well know, there’s no way to stretch out how long such products last, either. Once you’ve used them, you have to buy more. There’s no choice. In short, consumer staples companies benefit from the most stable demand in the world. Sure, they sell boring products. But they’re essential ones. And if that’s not safe, I’m not sure what qualifies. But here’s the real reason to opt for consumer staples stocks over Treasuries… It’s All About the Yield! How do you feel about getting a 3% return on your capital for 10 years? Pretty weak, right? Well, that’s just what investors are doing if they buy Treasuries at current prices. I mean, wouldn’t it be smarter to buy another safe asset that promises to pay a higher yield over time? That’s exactly what undervalued consumer staples stocks like Kimberly-Clark (NYSE: KMB) and Kraft Foods (NYSE: KFT) offer.... Read more