In this article, we will take a look at some of the best dividend stocks in the consumer cyclical sector.
Consumer spending has been unpredictable for some time, influenced by ongoing economic conditions. Some months see strong growth, while others experience a decline. In November, spending on goods rose by 3.4%, slightly outpacing the 2.8% increase in services. However, in January, US consumer spending declined for the first time in nearly two years. According to the Commerce Department’s Bureau of Economic Analysis, consumer spending—which makes up over two-thirds of US economic activity—declined by 0.2% in January. This marked the first drop since March 2023 and was the most significant decline in nearly four years. The decrease followed a stronger-than-expected rise of 0.8% in December, which was initially estimated at 0.7%. At the same time, the goods trade deficit reached a record high as businesses ramped up imports ahead of potential tariffs. These factors suggest the economy may face slower growth or even a downturn this quarter.
Consumer cyclical companies manufacture goods and services that are considered non-essential, meaning consumers are more likely to spend on them when they have extra income or feel financially secure. This category includes businesses in industries such as retail, automotive, travel and leisure, entertainment, and luxury goods.
In February, US business activity slowed significantly, driven by growing concerns over import tariffs and substantial reductions in federal government spending. These factors wiped out the gains seen after President Donald Trump’s election victory. According to S&P Global, business and consumer sentiment has been increasingly affected by the administration’s policies. The firm’s flash U.S. Composite PMI Output Index, which measures both manufacturing and services activity, dropped to 50.4 as of February 22—the lowest level since September 2023—down from 52.7 in January. Since a reading above 50 indicates expansion, this decline suggests a slowdown in private sector growth.
Morningstar equity analyst Noah Rohr made the following comment about the performance of consumer cyclical stocks:
“We’re seeing more pressure on the discretionary side. Consumers are being more cautious with their spending, prioritizing … essential categories like food and beverage and household essentials.”
Persistent inflation is putting pressure on consumer spending, leading to shifts in purchasing habits—even for essential goods. This trend is also impacting the stock market. Although inflation has eased, food prices remain considerably higher than in previous years. As a result, Rohr has observed that grocery stores have been lagging behind larger retailers in performance.
A survey by McKinsey & Company found that, in the first quarter of the year, 46% of US consumers felt optimistic, supported by stable inflation, low unemployment, and steady job growth. However, not everyone shared this outlook. Just over a third expressed mixed feelings about the economy, while pessimism rose slightly from the previous quarter. Interestingly, while stable inflation contributed to optimism, half of the respondents still cited rising prices as their top concern, with older consumers being more worried about inflation than younger ones. The survey also revealed that consumers planned to cut back on spending in many discretionary categories. This suggests that even those with a positive economic outlook, along with those feeling uncertain or pessimistic, may be cautious about their spending habits.
In 2025, consumer cyclical stocks have underperformed compared to the broader market and more defensive sectors. Since the start of the year, the Consumer Discretionary Index has declined by nearly 8%. However, the sector remains a strong dividend payer. In the third quarter of 2024, companies in this sector distributed nearly $23 billion in dividends, a significant increase from $15.3 billion during the same period in 2023, as reported by Janus Henderson. Over the years, dividend payouts in the sector have steadily grown, rising from $16.4 billion in 2018 to $23 billion in 2024.
Our Methodology
For this list, we scanned the holdings of S&P’s Consumer Discretionary index and identified dividend stocks from the entertainment, technology, retail, housing, materials, and automotive industries. These companies are strong dividend payers and have decent yields. From that group, we picked 12 dividend stocks with the highest number of hedge fund investors, according to Insider Monkey’s database of Q4 2024. The stocks are ranked in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12. Jack in the Box Inc. (NASDAQ:JACK)
Number of Hedge Fund Holders: 17
Jack in the Box Inc. (NASDAQ:JACK) is an American fast-food restaurant chain, headquartered in California. The company follows the franchise business model and is known for its diverse menu. Despite challenges such as inflation affecting its core low-income customer base and rising wages in California—where nearly 45% of its outlets are located—the company is gearing up for a strong recovery. Since acquiring Del Taco in March 2022, it has remained focused on growing its presence, upgrading kitchen operations, and improving digital ordering and delivery services. Its plans to open new locations, including an expansion into Chicago in 2025, reflect confidence in its long-term growth potential.
In fiscal Q1 2025, Jack in the Box Inc. (NASDAQ:JACK)’s total revenue declined by 3.7% to $469.4 million, down from $487.5 million in the same quarter last year. The decrease was largely driven by Del Taco’s refranchising transactions. Net income for the first quarter of fiscal 2025 came in at $33.7 million. The company’s same-store sales saw a modest rise of 0.4%. This included a 0.5% increase in franchise locations, while company-owned stores experienced a slight decline of 0.4%.
Despite mixed overall results, Jack in the Box Inc. (NASDAQ:JACK) reported a strong cash position in the most recent quarter. The company’s operating cash flow came in at over $105.6 million, compared with a negative operating cash flow of $22,675 in the same period last year. It has been regularly paying dividends to shareholders, which makes it one of the best dividend stocks on our list. The company pays a quarterly dividend of $0.44 per share and has a dividend yield of 4.87%, as of March 4.
11. Amcor plc (NYSE:AMCR)
Number of Hedge Fund Holders: 29
Amcor plc (NYSE:AMCR) is a packaging company, headquartered in Australia. The company offers a wide range of related products for different industries. Amcor and Berry Global Group recently revealed that their shareholders have overwhelmingly approved the merger of the two companies. This vote fulfills a key condition for the combination, which was initially announced in November 2024. The merged entity will become a leading force in consumer and healthcare packaging, leveraging advanced material science and innovation to enhance product development and meet both customer demands and sustainability goals. With a stronger growth outlook and anticipated synergies of $650 million, the merger is expected to create substantial value for shareholders in both the short and long term.
In fiscal Q2 2025, Amcor plc (NYSE:AMCR) reported revenue of $3.24 billion, down 0.3% from the same period last year. Volumes increased by 2.3% year-over-year, building on the 1.6% growth recorded in the first quarter and marking the fourth consecutive quarter of sequential volume gains. On a comparable constant currency basis, adjusted EBIT reached $363 million, reflecting an approximately 5% increase from the previous year.
In the first half of FY25, Amcor plc (NYSE:AMCR) generated an operating cash flow of $228 million, compared with $159 million in the prior-year period. The company currently offers a quarterly dividend of $0.1275 per share and has a dividend yield of 5.12%, as of March 4. AMCR is one of the best dividend stocks on our list as the company has raised its payouts for 41 years in a row.
10. Genuine Parts Company (NYSE:GPC)
Number of Hedge Fund Holders: 36
Genuine Parts Company (NYSE:GPC) is a Georgia-based industrial supplies company that deals in automotive and industrial replacement parts. The stock struggled in 2024, declining by over 18% over the past year. The company is dealing with two key demand-related challenges. First, industrial production in its primary US market has slowed, outweighing the gains from international demand. Second, sales of replacement automotive parts have seen a slight decline.
That said, Genuine Parts Company (NYSE:GPC) reported strong earnings in the fourth quarter of 2024. The company posted revenue of $5.77 billion, which showed a 3.3% growth from the same period last year. The revenue also beat analysts’ estimates by $57.6 million. Gross profit amounted to $2.1 billion, representing 35.9% of total sales, reflecting a 1.8% increase from the previous year’s figure of $2.0 billion, which accounted for 36.4% of sales. Net income stood at $133 million, translating to $0.96 per diluted share, compared to $317 million, or $2.26 per diluted share, in the same period last year.
Genuine Parts Company (NYSE:GPC)’s cash position also came in strong. In FY24, the company posted an operating cash flow of $1.3 billion and its free cash flow came in at $684 million. Due to this cash generation, the company was able to return $705 million to shareholders through dividends and share repurchases. On February 19, it declared a 3% hike in its quarterly dividend to $1.03 per share. This marked the company’s 69th consecutive year of dividend growth, which makes GPC one of the best dividend stocks on our list. The stock supports a dividend yield of 3.35%, as of March 4.
