Toothpaste. Toilet paper. Soap. Cereal.

These products aren’t nearly as sexy as smartphones or social networks. But for the past few years, the stocks behind the companies that make and sell the boring items we consume every day have run like a scalded dog.

Since the post-panic market lows of early 2009, the Consumer Staples Select SPDR (NYSE: XLP) has risen 140%. Not including dividends, that’s an average annual return of 36%. Throw those in, and you get an annual total return north of 40%. Not too shabby. (Coincidentally, the return on the S&P 500 index for the same interval is about the same.)

How High Can They Go?
As investors have tiptoed back into equities, they’ve gravitated toward stocks of staid consumer goods manufacturers.

These huge companies might not grow earnings at lightning-fast rates. However, the well-run companies in this sector deliver consistent, predictable earnings and have steadily grown their dividends.

While the stock market has rallied, cautiously bullish investors have bid up the prices of these perceived “safe” stocks. Look at the one-year returns for some of the most widely held names in consumer staples.

Unilever (NYSE: UL) — Peddling everything from shampoo to iced tea, this Dutch behemoth has gained more than 25%.

Campbell Soup Co. (NYSE: CPB) — Soup is not only good food, but it’s profitable, too. Shares are up nearly 44%.

Colgate-Palmolive (NYSE: CL) — Fresh breath, healthy gums and returns of more than 25%.

Kimberly-Clark (NYSE: KMB) — While paper manufacturers are often categorized as a cyclical industry, Kimberly-Clark’s core portfolio consists of necessities such as toilet paper and disposable diapers. That’s translated into a 32%-plus return.#-ad_banner-#

With an average return of 31%, this grocery basket of stocks handily beat the S&P 500’s 27% during the past year. It would be safe to say these names, like many of their peers, look a bit stretched out from a valuation standpoint. But if you’re searching for defensive stocks in consumer staples to add to your portfolio, there are a few that seem more reasonably priced compared with the rest of the bunch.

Great Brands, Great Prices
Again, it pays to be cautious when putting money to work in a lofty market. These names are a good starting point.

B&G Foods (NYSE: BGS) — Want a little of Emeril Lagasse’s “Bam!” in your portfolio? Then check out B&G. With an impressive $1.6 billion market cap, this company has quietly grown itself into a major packaged-foods company.

The company has grown its product portfolio — which includes Cream of Wheat, Ortega, Trappey’s and Mrs. Dash — by acquiring smaller yet well-known brands from bigger companies that are no longer able to manage those brands profitably. B&G is well-positioned to breathe life into those brands through innovative and strategic marketing.

B&G’s shares trade around $30 and yield 3.7%. More impressive is that the company’s year-over-year growth in earnings per share (EPS) was more than 15%. In comparison, ketchup giant Heinz (NYSE: HNZ), which was acquired by Warren Buffett‘s Berkshire Hathaway (NYSE: BRK-A), actually saw year-over-year EPS growth decline by more than 6%.

Procter & Gamble (NYSE: PG) — This Cincinnati-based behemoth is the gold standard in consumer staples stocks. Look under your sink or in your laundry room or medicine cabinet, and odds are you’ve given P&G some money. Crest, Pampers, Charmin, Tide, Head & Shoulders, and Oil of Olay are some of its stalwart brands.

One of the main reasons to hold P&G shares is the growing middle class in emerging markets. As these consumers evolve in emerging economies, more disposable income will go toward personal care and hygiene products. The company is well positioned to take advantage of this, and no one markets better than P&G.

Another factor is P&G’s habit of divesting itself of valuable yet unprofitable brands. Notable sales include Pringles potato crisps, Folgers coffee and Jif peanut butter. The company’s food brands are gone, giving P&G the ability to focus on its core brands.

Shares trade around $80 and yield 3%. The average consumer-staples dividend yield of representative S&P 500 stocks is around 2.7%, so P&G represents an 11% pickup in yield.

ConAgra Foods (NYSE: CAG) – With a portfolio of popular food brands such as Hunt’s, Chef Boyardee, Healthy Choice and Orville Redenbacher, ConAgra also adds investor value with its food service and industrial business, which provide specialty potatoes, milled grains, dehydrated vegetables and seasoning.

Once a perennial takeover candidate, the company squashed that speculation by acquiring Ralcorp Holdings late last year. This allowed ConAgra to remain independent and add scale to its business, thanks to Ralcorp’s title as the nation’s largest private-label (store brand) food company.

Shares trade at around $36.50 and yield 2.8%. ConAgra’s forward price-to-earnings (P/E) ratio is about 16. In comparison, Campbell Soup has a forward P/E of close to 19, making ConAgra a 15% discount on a P/E basis.

Risks to consider: While these names seem to offer more value than their peers, keep in mind that once the consumer staples sector begins to correct, all of that sector’s stocks will be affected. Luckily, the average dividend yield for these three stocks is 3.26% versus an average yield of 2.7% for S&P 500 consumer staples stocks, a difference of 56 basis points. All consumer-staple companies, especially food manufacturers, face input cost risk in an inflationary environment; at the moment, commodity price inflation appears relatively tame.

Action to take –> These stocks carry an average dividend yield of 3.6% and forward P/E of 18. If each company can maintain its current execution, the collective forward P/E could expand to 22. While this sounds expensive relative to the S&P 500’s forward P/E of 14, the average forward P/E on consumer staples stocks for the past 20 years has been 21. A multiple of 22 would be within the normal range. This would translate into 12-month price targets of $98 for Procter & Gamble, $48 for ConAgra, and $34 for B&G Foods. Factoring in dividends, that’s a 12-month average return of 26%. Not bad for a tired-looking sector.

P.S. — Have you read our Top 10 Stocks for 2013? Since we first began publishing this annual report in 2003, our picks have beaten the market 7 out of the past 9 years… including average annual gains of up to 38.7% in a single year. Go here to learn more.