Inflation Fears Drive Investors Toward Consumer Staples Stocks

The recent uptick in oil prices and talk of possible rate hikes have once again brought inflation fears to the forefront. As a result, investors are turning their attention to consumer staples stocks, which tend to perform well during times of rising costs.

One such stock is Elders (ASX:ELD), an Australian agribusiness that supplies farmers and regional communities with essential goods like seeds, fertiliser, animal health products, and advisory services. The company generated A$3.6 billion in revenue from its Australian operations last year and continues to pay fully franked dividends.

However, Elders' balance sheet is a cause for concern, with net debt of A$621.6 million and reliance on external borrowings. Additionally, the company faces margin pressure and earnings volatility due to one-off items.

PZ Cussons (LSE:PZC) is another consumer staples stock that investors are watching closely. The company sells everyday baby, beauty, and hygiene brands across various regions, including the U.K., Europe, Africa, the Americas, and Asia Pacific. PZ Cussons has moved from a loss to a £19.8 million net profit on £541.4 million of sales and is focusing on e-commerce, data-driven marketing, and a sharper emphasis on hygiene, beauty, and baby products.

However, investors need to weigh dividend cover, reliance on external borrowing, and exposure to fragile markets such as Nigeria, where currency and inflation pressures can quickly affect reported performance.