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Key Takeaways
- Investors have started rotating out of volatile tech stocks and into safer assets.
- Consumer staples are often considered a 'safe' sector since its constituients sell necessities like food, household items, and hygiene products.
- These three consumer staples stocks appear to be on the verge of breaking out following a rough performance in 2025.
A new rotation is underway as investors abandon the tech ship in search of safer assets. AI hyperscalers are still posting solid earnings, but even Mag Seven stocks are selling off after posting impressive top and bottom-line beats. As bold AI capital expenditure (CapEx) plans are met with skepticism rather than optimism, the market is moving toward a risk-off environment, where commodities and sectors like consumer staples look more attractive. If the tech rotation continues to intensify, the three stocks we discuss today have upside potential in addition to strong dividend income.
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Rotation Into Consumer Staples Is Picking Up Steam
Nothing lasts forever in markets, and the AI trade is starting to wobble harder than it has since the end of the Fed hiking cycle in 2022. AI bellwether NVIDIA Corp. (NASDAQ: NVDA) has gone nowhere for six months, and Oracle Corp. (NYSE: ORCL) has lost 60% since its September all-time high. Mega-caps like Alphabet Inc. (NASDAQ: GOOGL) and Amazon Inc. (NASDAQ: AMZN) both sank after earnings despite announcing 2026 CapEx plans that rival the GDP of Morocco. But data center growth takes time, and hyperscalers are competing for increasingly scarce resources (e.g., energy and memory).
Investors are starting to look for risk-off assets in case these bold plans fail to deliver profits, but the market action in gold and silver over the last few weeks can hardly be described as a flight to safety. Money might be flowing out of tech stocks, but it’s not leaving the market entirely as this post from Bloomberg’s Joe Weisenthal illustrates:
Consumer staples usually aren’t the target of speculative fervor, so massive inflows likely mean investors are starting to take some risk off the table as speculative returns diminish. These are defensive-oriented companies with consistent, predictable sales and usually return a significant portion of their profits to shareholders. And who knows? With cryptocurrencies crashing and the precious metals trade sputtering out, maybe the stampede visits this sector next.
3 Breakout Consumer Staples Stocks With Strong Dividends
Predictability is a perk with value sectors like consumer staples, but that doesn’t always mean sacrificing growth. The three stocks selected here are all household names that suffered significant drawdowns in 2025. But now that we’ve entered 2026, these three are showing signs of technical breakouts as well.
The biggest tech investors have unloaded their top AI investments. Peter Thiel's fund dumped its entire $100 million Nvidia stake. SoftBank unloaded its entire $5.8 billion position. Perhaps the biggest signal is Berkshire Hathaway sitting on $382 billion in cash, more than Amazon, Microsoft, and Apple combined. Was this Warren Buffett's parting gift before stepping down? Four unstoppable market forces could upend the economy in the coming weeks. Any one could be devastating alone, but four at the same time would wreak havoc. The last time this played out was over 50 years ago, leading to a lost decade for stocks.
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Proctor and Gamble: Dividend King Making Long-Awaited Technical Breakout
Proctor and Gamble Co. (NYSE: PG) just had its best month in nearly two years, gaining 13% over the last 30 days. Margins are one reason for the breakout, as the company generated 270 basis points of productivity savings in its fiscal Q2 2026 to help offset tariff headwinds. The stock is also breaking out above a key technical level, surging above the 200-day simple moving average (SMA) for the first time since early last year.
The company maintained its 2026 revenue guidance, which is a positive sign for another year of dividend increases for this Dividend King. P&G has raised its dividend for 70 consecutive years, but allocates only 62% of its earnings and less than 50% of its free cash flow to maintaining it. The company returned more than $4.8 billion to shareholders in Q2 alone, so this stock is a great place to hide from market volatility.
Reynolds Consumer Products: Successfully Mitigating Tariffs and Commodities Volatility
Reynolds Consumer Products Inc. (NASDAQ: REYN) soared nearly 10% following its Q4 2025 earnings release on Feb. 4, boosted largely by its margin maintenance in the face of stiff tariffs and price increases. Aluminum is the biggest concern for the maker of Reynolds Wrap foil, as the spot price has jumped nearly 20% since last April. But Reynolds maintained 21% adjusted EBITDA margins on $220 million in earnings, successfully mitigating the price increase on its most important product. Hefty Products also posted a 3% year-over-year (YOY) retail volume increase.
The daily chart is showing signs of life, with a Golden Cross and support forming at the 200-day SMA. Reynolds also offers a 4% dividend yield with a 63.9% dividend payout rate (DPR), though it doesn’t have a history of raises like P&G. Reynolds' dividend functions more like a bond, but the company has plenty of room to maintain it, especially if alumnum price hikes slow.
Constellation Brands: Strong Earnings and Stock Breakout Calm Beer Slowdown Fears
A decline in beer sales has been a major concern for Modelo and Pacifico parent Constellation Brands Inc. (NYSE: STZ), but the company managed to hold off those fears for at least one quarter in its most recent report. Constellation released its fiscal Q3 2026 earnings last month, and revenue declined nearly 10% YOY (but was higher than expected). Beer operating margins came in better than expected, helping limit the damage, and the stock is up more than 15% since the Jan. 8 release.
Bullish momentum has been brewing in STZ since last November, and the stock has finally broken above the 200-day SMA after a long downtrend. Constellation is an intriguing value play, trading at just 12 times forward earnings and 2.6 times sales. It also uses only 12% of its cash flow to cover its 2.46% dividend yield and has raised its payout for five consecutive years.
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