The consumer discretionary sector took a hit last year as shoppers tend to cut back on discretionary spending when they feel the heat of inflation. As the Federal Reserve launched its rate hike onslaught to tame inflation, consumers started to tighten their belts. As of the end of 2022, the consumer discretionary subindex was down a whopping 37%, compared to a 19% decline of the S&P 500 index. On the other hand, the S&P 500 consumer staples subindex was down just by 2.7% in the period.
However, the consumer discretionary sector started to post a comeback this year as the market saw a strange optimism. As of February 7, consumer discretionary was one of the top-performing sectors of the S&P 500 in 2023.
While the Federal Reserve has indicated its plan to keep raising interest rates in 2023 amid rising inflation and a strong labor market, some believe consumer spending will remain strong. Retail spending in January jumped 3% from December on a seasonally adjusted basis. This spending growth was surprisingly boosted by vehicles, furniture, clothing and dining out. According to a Wall Street Journal report, Jeffrey Roach, chief economist at LPL Financial, believes consumer spending will remain strong as long as labor market, wage growth and savings rates hold up.
While consumer discretionary sector is sensitive to interest rate hikes, the industry is full of companies that are paying attractive dividends. These companies are expected to benefit in the long term when the market begins to recover. That’s why investing in consumer discretionary dividend stocks which have strong yields and dividend safety is a decent bet for long-term investors.
Best Consumer Discretionary Dividend Stocks To Buy Now
Photo by Karolina Grabowska: https://www.pexels.com/photo/hands-holding-us-dollar-bills-4968630/
Our Methodology
For this article, we scanned Insider Monkey’s database of 943 hedge funds and their stock holdings as of the end of the fourth quarter of 2022 and picked 15 consumer discretionary dividend stocks that had the highest number of hedge fund investors. We picked only those consumer discretionary dividend stocks that have dividend yields of over 2% and decent dividend growth histories in most cases.
Best Consumer Discretionary Dividend Stocks To Buy Now
Leggett & Platt, Incorporated (NYSE:LEG) makes bedding products and several other parts that are used in furnishing and automobiles. Leggett & Platt, Incorporated (NYSE:LEG) has upped its dividend consistently for the last five decades.
In February, Leggett & Platt, Incorporated (NYSE:LEG) declared a quarterly dividend of $0.44 per share, the same as in the previous quarter.
Insider Monkey’s database shows that 12 hedge funds had stakes in Leggett & Platt, Incorporated (NYSE:LEG). The total value of these stakes was about $25 million.
V.F. Corporation (NYSE:VFC) is undoubtedly one of the best consumer discretionary dividend stocks out there. After upping its dividend consistently for close to 50 years, V.F. Corporation (NYSE:VFC) recently reduced its dividend. However, Stifel analyst Jim Duffy recently said in a note that the surprise dividend cut by V.F. Corporation (NYSE:VFC) has created an attractive entry point for investors. The analyst said that the new dividend appears to be safe. The analyst set a $30 price target on the stock and upgraded V.F. Corporation (NYSE:VFC) to Buy from Hold.
A total of 25 hedge funds tracked by Insider Monkey reported having stakes in V.F. Corporation (NYSE:VFC) as of the end of the fourth quarter of 2022.
Diamond Hill Capital made the following comment about V.F. Corporation (NYSE:VFC) in its Q3 2022 investor letter:
“Our weakest performer in Q3 was apparel and footwear company V.F. Corporation (NYSE:VFC). Consumer spending concerns weighed on the market’s sentiment toward companies selling more discretionary goods. Additionally, management lowered guidance primarily due to weaker sales for its Vans brand, higher-than-expected industry discounting, and macroeconomic uncertainty. The remainder of the portfolio is performing well, as evidenced by solid refreshed long-term financial targets.”
Luxury department store chain company Nordstrom, Inc. (NYSE:JWN) is one of the notable consumer discretionary dividend stocks to buy now. Recently, Nordstrom, Inc. (NYSE:JWN) declared a quarterly dividend of $0.19 per share. Forward dividend yield came in at 3.9%.
A total of 27 hedge funds tracked by Insider Monkey had stakes in Nordstrom, Inc. (NYSE:JWN) as of the end of the fourth quarter of 2022.
Kitchenware and home furnishings giant Williams-Sonoma, Inc. (NYSE:WSM) ranks 12th in our list of the best consumer discretionary stocks to buy according to hedge funds. In December, Williams-Sonoma, Inc. (NYSE:WSM) declared a quarterly dividend of $0.78 per share. The forward yield came in at 2.68%.
Williams-Sonoma, Inc. (NYSE:WSM) was one of the 40 stocks picked up by a machine-learning model of UBS. Here is what the firm said while presenting its screen of these dividend stocks:
"To take advantage of the dividend theme, we present a screen of 40 stocks from the S&P 1500 (NYSEARCA:SPTM) (VLU) with a 2023e dividend yield >2%, a high quality score which ranks in the top 25th pctl and a strong relative dividend growth prediction over the next 6 months according to our machine learning model.”
As of the end of the fourth quarter of 2022, 64 hedge funds tracked by Insider Monkey had stakes in Williams-Sonoma, Inc. (NYSE:WSM). The total value of these stakes was $2.4 billion.
11. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 32
While companies are going through turmoil amid macroeconomic headwinds and are struggling to maintain their dividends, Restaurant Brands International Inc. (NYSE:QSR) recently surprised investors by announcing a dividend increase. In February, Restaurant Brands International Inc. (NYSE:QSR) announced a quarterly dividend of $0.55 per share, which was a 1.9% increase from the prior dividend of $0.54. Forward dividend yield at the time came in at 3.21%. The dividend is payable on April 5 to shareholders of record as of March 22.
At the end of the last quarter of 2022, 32 hedge funds tracked by Insider Monkey reported having stakes in Restaurant Brands International Inc. (NYSE:QSR). The net worth of these stakes was about $2.3 billion.
Consumer electronics retailer Best Buy Co., Inc. (NYSE:BBY) has proven its mettle time and again when it comes to dividends. Recently, Best Buy Co., Inc. (NYSE:BBY) declared a quarterly dividend of $0.92 per share, which was a whopping 4.5% increase from prior dividend of $0.88. Forward dividend yield at the time came in at 4.46%. The dividend is payable on April 13 to shareholders of record as of March 23.
At the end of the last quarter of 2022, 33 hedge funds tracked by Insider Monkey reported having stakes in Best Buy Co., Inc. (NYSE:BBY). The total worth of these stakes was $612 million. The most notable hedge fund stakeholder of Best Buy Co., Inc. (NYSE:BBY) was Ken Griffin’s Citadel Investment Group which owns a $151 million stake in the company.
Luxury fashion company Tapestry, Inc. (NYSE:TPR) is the owner of major brands, including Coach, Kate Spade, and Stuart Weitzman. In February, Tapestry, Inc. (NYSE:TPR) declared a quarterly dividend of $0.30 per share, the same as in the previous quarter. Forward dividend yield at the time came in at 2.72%. The dividend was payable on March 27 to shareholders of record as of March 10.
Tapestry, Inc. (NYSE:TPR) was one of the dividend stocks currently picked up by a machine learning model of investment firm UBS. UBS says that this basket of dividend stocks has outperformed by 5.5% over the last 6 months.
A total of 38 hedge funds tracked by Insider Monkey reported owning stakes in Tapestry, Inc. (NYSE:TPR). The total value of these stakes was $559 million.
Advance Auto Parts, Inc. (NYSE:AAP) is one of the best consumer discretionary dividend stocks to buy. Recently, Advance Auto Parts, Inc. (NYSE:AAP) posted its Q4 results. Adjusted EPS in the December quarter came in at $2.88, beating estimates by $0.46. Revenue in the quarter increased by 2.9% on a YoY basis to reach $2.47 billion, beating estimates by $50 million. Adjusted operating income margin in the quarter jumped 146 basis points. Comparable store sales in the period jumped 2.1%.
Advance Auto Parts, Inc. (NYSE:AAP) on February 1 declared a regular cash dividend of $1.50 per share. The dividend will be paid on April 28, 2023 to all common stockholders of record as of April 14, 2023.
Here is what Heartland Advisors specifically said about Advance Auto Parts, Inc. (NYSE:AAP) in its Q3 2022 investor letter:
“We also found an opportunity to add to our existing position in Advance Auto Parts, Inc. (NYSE:AAP) as the stock fell and the risk/reward profile improved. Advance underperformed early in the quarter as lower-quality sector peers bounced significantly. In August, shares fell further after the company reported second quarter earnings that disappointed because of weakerthan-expected same-store sales. Furthermore, management reduced its full-year earnings outlook by ~4%, citing softening consumer purchasing patterns within AAP’s “do-it-yourself” business.
Ford Motor Company (NYSE:F) ranks 7th in our list of the best consumer discretionary dividend stocks to buy now. In February, Ford Motor Company (NYSE:F) declared a quarterly dividend of $0.15 per share, in line with the previous dividend. The forward dividend yield at the time came in at 4.19%.
Ford Motor Company (NYSE:F) also declared a supplemental dividend of $0.65 per share.
In February, Ford Motor Company (NYSE:F)’s US sales jumped 21.9% on a YoY basis and by 7.7% on a MoM basis. The sales growth was driven by strong demand of its F-150 trucks.
Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:
“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 Ford (NYSE:F), 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%.”
Colorado-based mountain resort company Vail Resorts, Inc. (NYSE:MTN) ranks 6th in our list of the best consumer discretionary stocks to buy now. In December, Vail Resorts, Inc. (NYSE:MTN) declared a quarterly dividend of CAD 1.91 per share, unchanged from the previous quarterly dividend.
At the end of the fourth quarter of 2022, 41 hedge funds tracked by Insider Monkey had reported owning stakes in Vail Resorts, Inc. (NYSE:MTN). The total value of these stakes was $1.5 billion. The biggest hedge fund stakeholder of Vail Resorts, Inc. (NYSE:MTN) was Robert Joseph Caruso’s Select Equity Group which owns a $623 million stake in the company.
Baron Funds made the following comment about Vail Resorts, Inc. (NYSE:MTN) in its Q4 2022 investor letter:
“Following recent strength in its shares, we reduced our position in Vail Resorts, Inc. (NYSE:MTN). The company owns and operates a premier portfolio of mountain resorts including marquee resorts such as Vail, Beaver Creek, Breckinridge, Park City, Whistler Blackcomb, and Keystone. We remain optimistic about Vail’s long-term prospects and may look for opportunities to add to our position again.”
