We recently compiled a list of the 12 Best Consumer Cyclical Dividend Stocks to Buy Right Now. In this article, we are going to take a look at where NIKE, Inc. (NYSE:NKE) stands against the other consumer cyclical dividend stocks.
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).
A team of trainers and athletes displaying a wide range of athletic and casual footwear.
NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 73
NIKE, Inc. (NYSE:NKE) is an American apparel and footwear company, headquartered in Oregon. Jefferies believes the company’s widespread brand presence and strong global distribution network will contribute to its future growth. The investment firm projects that Nike could achieve a compound annual growth rate of approximately 7%, outperforming the consensus analyst estimate of around 3%. Furthermore, Jefferies expects that the company’s new management team will enhance its product strategy, positioning it to exceed analysts’ average financial projections for fiscal 2027 by a significant margin. The firm has set a price target of $115 for the stock.
NIKE, Inc. (NYSE:NKE) faced challenges in the second quarter, particularly in China, where revenue declined by 8% year-over-year. However, the drop was not as steep as analysts had expected, as projections had pointed to a 10% decline. Meanwhile, gross margins saw a slight decrease, falling to 43.6% from 44.6% in the same period last year. Despite these setbacks, operating expenses were reduced by 5%, potentially allowing for reinvestment in marketing efforts.
NIKE, Inc. (NYSE:NKE)’s quarterly dividend comes in at $0.40 per share and has a dividend yield of 2.09%, as of March 4. The company remains focused on delivering strong shareholder returns, supported by its solid financial position. In the most recent quarter, it reported $7.9 billion in cash and cash equivalents, reflecting a 1% increase from the previous year. It also returned $1.6 billion to shareholders through dividends and share repurchases. With a track record of 23 consecutive years of dividend increases, Nike is regarded as one of the best dividend stocks in the consumer cyclical sector.
Overall NKE ranks 3rd our list of the best consumer cyclical dividend stocks to buy right now. While we acknowledge the potential for NKE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.