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This Month’s Exclusive Story

3 Dividend-Backed Consumer Staples to Reinforce Your Portfolio

Authored by Dan Schmidt. Date Posted: 1/26/2026. 

Quick Look

• Consumer staples stocks offer capital preservation, low volatility, and reliable dividend income during uncertain markets.
• Waste Management, British American Tobacco, and Service Corporation International each serve inelastic demand niches with strong dividend profiles.
• Technical setups across all three stocks suggest potential upside, reinforcing their appeal as defensive investments.

The best offense is sometimes a good defense, and that’s especially true when markets turn volatile. Defensive stocks can help preserve capital in a declining market by limiting losses and supplementing portfolios with dividend income. Some sectors offer better protection than others; today we look at a common defensive sector: consumer staples.

Consumer Staples Stocks Can Protect Capital in Volatile Markets

Most investors think of gold or U.S. Treasuries when safe-haven assets are discussed, but capital doesn’t need to exit the stock market to be protected. Some sectors are less volatile than others, and some offer income through dividends in addition to equity appreciation. Consumer staples often provide a combination of both.

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Consumer staples are considered a “safe” sector because they include companies that sell necessities rather than discretionary goods. Items such as groceries and toiletries are purchased consistently, which limits upside but provides predictable, reliable revenue. Other factors that make staples attractive in volatile markets include:

• Steady dividend income – Predictable revenue supports reliable profits, and many staples companies return a portion of those profits to shareholders as dividends. Stable earnings are key to dividend safety, and consumer staples stocks are less likely to face dividend cuts.
• Pricing power – The ability to pass rising costs to consumers is crucial amid tariffs and inflation. Consumer staples often can pass on cost increases because there are few substitutes for basic necessities. A family can skip a restaurant meal, but they generally can’t forgo toilet paper, toothpaste, or soap.
• Low beta – Beta measures a stock’s volatility relative to the broader market. Low-beta stocks tend to be less volatile than the market and are often sought by institutional investors when turbulence rises. Consumer staples often provide relief from market volatility, helping preserve capital during steep drawdowns.

3 Consumer Staples With Inelastic Product Demand

The three stocks below all sell products or services with inelastic demand, though they aren’t the traditional grocery-store names you might expect. Each company has a strong position in its niche, offering steady income and reliable dividends.

Waste Management: Strong Dividend and Irreplaceable Infrastructure

Waste Management Inc. (NYSE: WM) depends on American households and businesses disposing of large volumes of waste every week. Waste Management’s moat is not just the basic service it provides but its vast network of landfills, which gives the company near-monopolies in many local markets.

Environmental regulations make landfill permitting difficult and time-consuming to obtain, so Waste Management’s market position is durable — much like its dividend. The company has a roughly 52% dividend payout ratio (DPR) and a 22-year history of annual payout increases.

WM shares are also showing technical strength: the price recently eclipsed the 200-day simple moving average (SMA) for the first time since last September. The bullish trend began in November when the Moving Average Convergence Divergence (MACD) produced a bullish cross, and a subsequent cross has confirmed the next leg of the rally.

British American Tobacco: Deep Value With Premium Dividend

British American Tobacco plc (NYSE: BTI) faces secular declines in traditional cigarette volumes, but its pivot to smokeless products — including e-cigarettes, vapes, and nicotine pouches — has helped reinvigorate U.S. revenue. As with most tobacco companies, the attraction is primarily the dividend: BTI currently yields more than 5% with a roughly 63% DPR. The company has increased payouts for 19 consecutive years, though low earnings growth means the stock can behave more like a bond during strong bull markets.

In the current market environment, BTI shares have gained nearly 60% over the past 12 months, and the stock may be poised for another leg higher after a consolidation. A bullish wedge has formed on the chart, with resistance at the prior all-time high and a series of higher lows forming the lower bound.

A breakout above that upper trend line would typically mark the start of a new uptrend, and both MACD and the Relative Strength Index (RSI) indicate bullish momentum is building.

Service Corporation International: A Necessary Service That Can’t Be Outsourced

Service Corporation International Inc. (NYSE: SCI) is the largest provider of funeral and cemetery services in North America. With an aging population, demand for these services is relatively steady. Many customers prepay for funeral and burial arrangements, allowing SCI to collect funds upfront and invest them in interest-bearing vehicles.

SCI’s balance sheet supports a sustainable dividend, which currently yields about 1.68% with a roughly 36.7% DPR. The dividend has grown at a roughly 10.57% annualized rate over the past five years, and the company has increased payouts for 15 consecutive years. During its Q3 earnings report, SCI raised its 2025 cash flow guidance to a range of $915 million to $950 million, which should help support further dividend growth.

Companies like SCI typically don’t deliver explosive stock returns, but modest capital appreciation combined with a steady dividend can be attractive in volatile markets. The chart shows improving technicals: the RSI bounced off oversold levels in December and has trended higher, and the share price recently broke above the 50-day and 200-day SMAs for the first time since late October.

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