U.S. consumer staples stocks limp after solid performance in 2022

By Medha Singh (Reuters) - Shares of U.S. grocers, packaged food companies and supermarkets were lagging in the first three weeks of 2023, in a sharp contrast to last

year, as their high valuations and unattractive dividend appeal pushed investors to U.S. Treasuries. The S&P 500 consumer staple sector, along with other bond proxies

including real estate and utilities, outperformed the broader market in 2022 amid recession fears, as investors sought shelter in dividend-paying companies. In a reversal of

the trend, consumer staples sector has shed 3.4% in 2023, the most among the major S&P sectors, while the S&P 500 has climbed 1.5% on easing bets of a severe economic

downturn. "Fundamentally, investors are starting to recognize the valuation of staples as a whole, which trade at a 25% premium to historical averages," said David Wagner,

portfolio manager at Aptus Capital Advisors LLC. "You couple this with the fact that there are other yield alternatives now relative to the yield-rich sector of

staples." Rising interest rates have lured investors towards robust payouts in U.S. government bonds for the first time in nearly a decade. The U.S. 10-year Treasury

yield stands at 3.4%, while the consumer staples sector is offering a dividend yield of 2.7%, according to Refinitiv data. Consumer companies, which witnessed soaring demand

for groceries and cleaning supplies during the peak of the pandemic, are now battling a triple whammy of low sales volumes, high input costs and a stronger dollar, as evidenced by

results from Procter & Gamble Co on Thursday.