In this article, we will discuss 11 best consumer cyclical dividend stocks to buy now. You can skip our detailed analysis of consumer stocks and their performance, and go directly to read 5 Best Consumer Cyclical Dividend Stocks to Buy Now.
In the first half of 2022, consumer stock witnessed a loss of $1.8 trillion in market value due to high inflation and continuous interest rate hikes, as reported by Bloomberg. The S&P 500 Consumer Discretionary Index is also down 30.19% year-to-date. However, consumer spending grew by 0.6% in September despite inflationary pressures, according to the Commerce Department’s data. Luke Tilley, Chief Economist at Wilmington Trust, talked about ongoing consumer trends in his interview with Wall Street Journal this October. He said that consumer spending increased due to fiscal stimulus given during the pandemic. He also said that although the consumer backdrop seems to be slowing but is overall strong.
Following the current trends, analysts are expecting that consumer spending in the US will start rebounding in 2023. Goldman Sachs analyst Jason English spoke to CNBC about this. He asserted that increased consumer spending will be able to counter the negative growth in household discretionary cash flow. He further mentioned that this improvement in cash flow will be because of wages. This growth in consumer spending and the sector’s cash flow will also provide a positive direction to consumer cyclical stocks. In view of this, we will discuss some of the best consumer cyclical stocks that pay dividends. Some of the major names included in the list are Leggett & Platt, Incorporated (NYSE:LEG), The Home Depot, Inc. (NYSE:HD), and Starbucks Corporation (NASDAQ:SBUX).
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Our Methodology:
For this list, we selected consumer cyclical dividend stocks from the housing, entertainment, retail, and automotive industries. We carefully studied the respective companies’ business models and also analyzed their financial health and dividend histories. The stocks are ranked according to their dividend yields, as recorded on November 1.
11 Best Consumer Cyclical Dividend Stocks to Buy Now
11. General Motors Company (NYSE:GM)
Dividend Yield as of November 1: 0.92%
General Motors Company (NYSE:GM) is an American multinational automotive manufacturing company that also owns assembly plants and distribution units across the country. The company restored its dividends in August this year, after ceasing its payouts for over two years due to the pandemic. It currently pays a quarterly dividend of $0.09 per share and has a dividend yield of 0.92%, as of November 1.
In Q3 2022, General Motors Company (NYSE:GM) reported an adjusted automotive free cash flow of over $6 billion. Its automotive operating cash flow was recorded at $11.6 billion, up from $309 million during the same period last year. The company generated nearly $42 billion in revenue during the quarter, which shows a 56.4% growth from the prior-year quarter.
In October, JPMorgan raised its price target on General Motors Company (NYSE:GM) to $59 with an Overweight rating on the shares, highlighting the company’s Q3 earnings beat. The firm also appreciated the company’s strong execution despite current economic conditions.
As of the close of Q2 2022, 75 hedge funds tracked by Insider Monkey owned stakes in General Motors Company (NYSE:GM), compared with 76 in the previous quarter. These stakes have a total value of over $3.4 billion.
Diamond Hill Capital mentioned General Motors Company (NYSE:GM) in its Q2 2022 investor letter. Here is what the firm has to say:
“Auto manufacturer General Motors Company (NYSE:GM)s was also among our bottom contributors in Q2. Rising interest rates and continued supply chain issues have increased uncertainty surrounding the auto industry, exerting downward pressure on stocks of auto makers. We continue to like GM’s focus on its most profitable market segments (SUV, crossovers, trucks) and believe the company’s heavy investments in autonomous capabilities will position it favorably as the secular movement towards autonomous vehicles continues.”
10. NIKE, Inc. (NYSE:NKE)
Dividend Yield as of November 1: 1.30%
NIKE, Inc. (NYSE:NKE) is an American multinational footwear manufacturing company that also specializes in the design and marketing of apparel and other accessories. The company has a 20-year run of consistent dividend growth, which places it as one of the best dividend stocks to buy. It currently pays a quarterly dividend of $0.305 per share for a dividend yield of 1.30%, as of November 1.
NIKE, Inc. (NYSE:NKE) remained committed to its shareholder return in its fiscal Q1 2023 earnings. The company returned $480 million in dividends to shareholders, up 11% from the prior-year quarter. It also repurchased shares worth over $1 billion during the Q1.
Raymond James initiated its coverage on NIKE, Inc. (NYSE:NKE) in October with an Outperform rating and a $99 price target. The firm sees the company as one of the most reliable stocks for long-term investment.
As of the close of Q2 2022, 72 hedge funds tracked by Insider Monkey had investments in NIKE, Inc. (NYSE:NKE), up from 67 in the previous quarter. These investments are collectively worth over $3.3 billion.
Leaven Partners mentioned NIKE, Inc. (NYSE:NKE) in its Q3 2022 investor letter. Here is what the firm has to say:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as NIKE (NYSE:NKE), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
9. The TJX Companies, Inc. (NYSE:TJX)
Dividend Yield as of November 1: 1.64%
The TJX Companies, Inc. (NYSE:TJX) is an American multinational department store corporation that sells off-price apparel. In October, Morgan Stanley raised its price target on the stock to $80 with an Overweight rating on the shares. The firm gave a positive outlook on off-price retailers post-pandemic.
In the second quarter of FY23, The TJX Companies, Inc. (NYSE:TJX) reported an operating cash flow of $641 million and ended the quarter with $3.5 billion of cash. The company returned $1 billion to shareholders, $346 million of which represented dividend payments.
The TJX Companies, Inc. (NYSE:TJX), one of the best dividend stocks on our list, offers a quarterly payout of $0.295 per share for a dividend yield of 1.64%, as of November 1.
At the end of Q2 2022, 49 hedge funds tracked by Insider Monkey owned stakes in The TJX Companies, Inc. (NYSE:TJX), compared with 55 in the previous quarter. The collective value of these stakes is over $1.55 billion.
8. Gentex Corporation (NASDAQ:GNTX)
Dividend Yield as of November 1: 1.81%
Gentex Corporation (NASDAQ:GNTX) is a Michigan-based electronics and tech company that manufactures equipment for the global automotive industry. The company had a ten-year dividend growth streak which was interrupted due to the pandemic in 2020. It currently pays a quarterly dividend of $0.12 per share and has a dividend yield of 1.81%.
In the third quarter of 2022, Gentex Corporation (NASDAQ:GNTX) reported an income from operations of $86.8 million, down from $88 million in the prior-year quarter. The company also repurchased 0.9 million of its shares for $22.3 million. Its revenue for the quarter saw a 23.5% year-over-year growth to $493.6 million.
In September, BofA maintained an Underperform rating on Gentex Corporation (NASDAQ:GNTX) with a $30 price target. The firm expressed concerns regarding auto volumes in 2023 considering the current market environment.
As of the end of June, 27 hedge funds tracked by Insider Monkey reported owning stakes in Gentex Corporation (NASDAQ:GNTX), up from 24 a quarter earlier. These stakes are collectively worth $495.3 million. With over 9 million shares, Ariel Investments was the company’s largest stakeholder in Q2.
7. Lowe’s Companies, Inc. (NYSE:LOW)
Dividend Yield as of November 1: 2.17%
Lowe’s Companies, Inc. (NYSE:LOW) is a North Carolina-based retail company that specializes in home improvement. During Q2 2022, the company generated $3 billion in operating cash flow and $2.7 billion in free cash flow. It returned $524 million to shareholders in dividends during the quarter, which takes its payout ratio to 27.08%.
Lowe’s Companies, Inc. (NYSE:LOW) is one of the best dividend stocks to buy as it has been making consecutive dividend payments since it went public in 1961 and also holds a 59-year track record of consistent dividend growth. The company currently pays a quarterly dividend of $1.05 per share and has a dividend yield of 2.17%, as of November 1.
Ahead of the company’s Q3 earnings, Citigroup maintained a Neutral rating on Lowe’s Companies, Inc. (NYSE:LOW) in October with a $215 price target. The firm appreciated the company’s strong fundamentals.
Lowe’s Companies, Inc. (NYSE:LOW) was a part of 53 hedge fund public portfolios in Q2 2022, compared with 65 in the previous quarter, according to Insider Monkey’s database. The stakes owned by hedge funds hold a combined value of roughly $5 billion. With over 10.2 million shares, Pershing Square was the company’s leading stakeholder in Q2.
Pershing Square Holdings mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2022 investor letter. Here is what the firm has to say:
“Lowe’s Companies, Inc. (NYSE:LOW)’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team that is successfully executing a multi-faceted business transformation. (Click here to read the full text)
6. McDonald’s Corporation (NYSE:MCD)
Dividend Yield as of November 1: 2.23%
McDonald’s Corporation (NYSE:MCD) is another best dividend stock to buy on our list. The multinational fast-food chain was lauded by Street analysts due to its earnings beat in Q3. In October, both RBC Capital and Truist raised their price targets on the stock to $295 and $300, respectively.
On October 14, McDonald’s Corporation (NYSE:MCD) declared a 10% hike in its quarterly dividend to $1.52 per share, which marked the company’s 46th consecutive year of dividend growth. Moreover, it has raised its dividends at a CAGR of 7.98% in the past five years. As of November 1, the stock has a dividend yield of 2.23%. It can be a good addition to dividend portfolios alongside Leggett & Platt, Incorporated (NYSE:LEG), The Home Depot, Inc. (NYSE:HD), and Starbucks Corporation (NASDAQ:SBUX).
At the end of Q2 2022, 50 hedge funds tracked by Insider Monkey owned stakes in McDonald’s Corporation (NYSE:MCD), compared with 58 in the previous quarter. The consolidated value of these stakes is over $2.3 billion. Bridgewater Associates owned the largest position in the company in Q2.
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Disclosure. None. 11 Best Consumer Cyclical Dividend Stocks to Buy Now is originally published on Insider Monkey.