My Top 2 Consumer Staples Stocks for May 2026

The economic outlook looks more uncertain than it has in some time. With tariffs and the Iran war keeping prices high, the Federal Reserve has held off on cutting interest rates, potentially curtailing economic growth. Meanwhile, the labor market looks shaky.

But if you're looking for stocks to invest in, consumer staples companies, which sell items whose demand doesn't fluctuate with the economy, have a place in your portfolio.

PepsiCo (NASDAQ: PEP) and Procter & Gamble (NYSE: PG) aren't merely short-term buying opportunities. Their dividends and valuations make them excellent long-term holdings.

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1. PepsiCo

PepsiCo sells beverages and food under well-known brands like Pepsi, Mountain Dew, Gatorade, Doritos, and Quaker. Clearly, it's more than a soda company, with its products including water, chips, oatmeal, and rice, among others.

The company's sales have been sluggish, partly due to consumers pushing back against higher prices and choosing lower-priced alternatives, proving that even food and beverage companies aren't immune to broader economic pressures. Fortunately, PepsiCo has seen progress in its top-line performance.

PepsiCo's first-quarter revenue, after stripping out foreign-currency exchange translations and the impact of acquisitions and divestitures, grew 2.6% year over year, with volume increasing slightly.

That may not sound impressive, but it's definitely a step in the right direction. For all of 2025, PepsiCo's adjusted sales grew 2%, but price increases contributed 4 percentage points, while lower volume subtracted 2 percentage points. The recent results show volume moving in the right direction.

For the year, management expects a 2% to 4% sales increase, driving a 4% to 6% earnings-per-share (EPS) gain. If management continues to execute its plans, including selective price reductions to drive higher volumes, PepsiCo's sales and earnings growth should accelerate in the coming years.

Turning to the stock's valuation, the shares have a price-to-earnings (P/E) ratio of 24, lower than their 10-year median of 26. The stock also trades at a lower multiple than the S&P 500 index's P/E of 32.

Meanwhile, shareholders can collect dividends, which the board of directors raised by 4% earlier this year. PepsiCo has now increased payments for 54 straight years, making the company a Dividend King, a group that has hiked dividends for at least half a century. At the new $1.48 quarterly rate, PepsiCo's stock has a 4% dividend yield. That's nearly quadruple the S&P 500's 1.1% yield.

2. Procter & Gamble

It doesn't get more mundane than Procter & Gamble's offerings. These include shampoo, razors, toothbrushes, toothpaste, laundry detergent, and diapers. The company sells these basic necessities under popular brands that command high market shares, like Head & Shoulders, Gillette, Oral-B, Tide, and Pampers.

While other consumer goods companies have seen sales struggle, Procter & Gamble's fiscal third-quarter sales grew 3%, with higher volume accounting for 2 percentage points. The figure has been adjusted to remove foreign-currency translation effects and the impact of acquisitions/divestitures. The results covered the period that ended on March 31.

The stock has an attractive valuation compared to its own historical P/E ratio and the overall market, using the S&P 500 as a proxy. Procter & Gamble's shares have a P/E ratio of 21 versus the 10-year median of 25.

You'd be hard-pressed to find a company more committed to not only paying dividends, but raising them regularly. Last month, Procter & Gamble announced a 3% increase in its quarterly payout to $1.0885 a share. It has paid a dividend since 1890 and raised the payment annually for the last 70 years.

At the new rate, Procter & Gamble's stock has a market-beating 3.1% dividend yield. That's almost triple the S&P 500's yield.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.