In this article, we discuss 12 best consumer cyclical dividend stocks to buy now.
Consumer cyclical stocks are companies that are highly sensitive to changes in the business cycle and consumer spending patterns. These companies typically produce goods and services that are considered non-essential or discretionary, such as automobiles, clothing, travel, and entertainment. During periods of economic growth and expansion, consumer cyclical stocks tend to perform well as consumers have more disposable income to spend on non-essential items. On the other hand, during recessions and economic downturns, consumers tend to cut back on discretionary spending, causing the performance of consumer cyclical stocks to suffer.
Last year’s inflation and consistent interest rate hikes caused consumer stocks to suffer heavily, with the S&P 500 consumer discretionary index falling by 35% through December 19. This was the sector’s worst performance on record. We also reported in our previous article that consumer stocks lost nearly $1.8 trillion in market value in the first half of 2022. However, with growing consumer spending, the index gained 9.65% this year, as of March 24, compared with a 3.42% gain in the S&P 500.
Consumer spending is one of the most critical components of the US economy, representing over two-thirds of the country’s GDP. The Covid pandemic of 2020 has had a significant impact on consumer spending patterns, with people spending more time at home due to restrictions on travel and public gatherings. The Commerce Department reported that consumer spending fell by 7.5% in March 2020 due to the shutdown of major industries and businesses. However, with the accessibility to online channels, purchasing across industries began to rebound. This January, consumer spending increased by 1.8%, which was its biggest gain since March 2021, as reported by Reuters. In addition to this, the personal consumption expenditures (PCE) price index gained 5.4% in the 12 months through January 2023, after soaring 5.3% in December.
The recent collapse of Silicon Valley Bank (SVB) sent a chill through the stock market while impacting a wide range of industries. Though the retail industry had less exposure to SVB in comparison with other sectors, the past few years saw growing public offerings of tech-focused retailers. It’s about time that this fallout would hamper investments in these new digital ventures. Forbes reported that following the collapse, Shopify temporarily stopped payments to online sellers with SVB accounts. Similarly, Stitch Fix lost a $40 million line of credit it had at the bank. To know more about the impact of the bank collapse on the retail industry, readers can have a look at our previous article titled 15 Best Cyclical Stocks to Buy Now.
In these market conditions, analysts recommend focusing on companies with strong free cash flows as they perform better than their peers. Moreover, these companies also pay out dividends regularly to shareholders, which helps them stay afloat during market downturns. Some companies with solid financials are The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and The Procter & Gamble Company (NYSE:PG) which is evident through their decades-long dividend growth histories. In this article, we will discuss the best consumer cyclical dividend stocks to buy.
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Our Methodology:
For this list, we selected consumer cyclical dividend stocks from the entertainment, technology, retail, housing, materials, and automotive industries. These companies are strong dividend payers and have decent yields. We sorted these dividend stocks using Insider Monkey’s proprietary hedge fund sentiment data as of Q4 2022.
12. Leggett & Platt, Incorporated (NYSE:LEG)
Number of Hedge Fund Holders: 12
Leggett & Platt, Incorporated is a Missouri-based diversified manufacturing company that designs various products that belong to the home and automobile industries. On February 23, the company declared a quarterly dividend of $0.44 per share, which was in line with its previous dividend. The company maintains a 51-year streak of consistent dividend growth, which makes it one of the best dividend stocks on our list. As of March 27, the stock has a dividend yield of 5.70%.
Leggett & Platt, Incorporated holds a strong dividend growth track record like other dividend stocks such as The Coca-Cola Company, PepsiCo, Inc., and The Procter & Gamble Company.
Leggett & Platt, Incorporated reported a solid cash position in FY22 as its operating cash flow for the year came in at $441 million, which showed a 63% growth from the same period last year.
At the end of Q4 2022, 12 hedge funds in Insider Monkey’s database owned stakes in Leggett & Platt, Incorporated, compared with 14 in the previous quarter. The collective value of these stakes is over $25 million. Among these hedge funds, Citadel Investment Group was the company’s leading stakeholder in Q4.
11. Foot Locker, Inc. (NYSE:FL)
Number of Hedge Fund Holders: 25
Foot Locker, Inc. (NYSE:FL) is an American sportswear and footwear retailer which has operations in over 28 countries. Evercore ISI upgraded the stock to Outperform in March and also raised its price target on the stock to $60. The firm appreciated the company’s strong business model.
Foot Locker, Inc., one of the best dividend stocks on our list, has paid dividends to shareholders every year since 1972, except for 2020 when it omitted its payouts due to the pandemic. The company currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 4.18%, as of March 27.
As of the close of Q4 2022, 25 hedge funds tracked by Insider Monkey reported having stakes in Foot Locker, Inc., up from 24 in the previous quarter. These stakes have a consolidated value of $312.2 million.
Miller Value Partners mentioned Foot Locker, Inc. in its Q1 2022 investor letter. Here is what the firm has to say:
“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”
10. Gentex Corporation (NASDAQ:GNTX)
Number of Hedge Fund Holders: 26
Gentex Corporation (NASDAQ:GNTX) is a Michigan-based tech and electronics company that specializes in equipment for the global automotive industry. In the fourth quarter of 2022, the company reported revenue of $493.6 million, which showed a 17.6% growth from the same period last year. In 2022, it returned over $113 million to shareholders in dividends, which makes it one of the best dividend stocks on our list.
Gentex Corporation currently pays a quarterly dividend of $0.12 per share and has a dividend yield of 1.79%, as of March 27.
As per Insider Monkey’s Q4 2022 database, 26 hedge funds reported having stakes in Gentex Corporation, worth nearly $511 million collectively. With over 8.8 million shares, Ariel Investments was the company’s leading stakeholder in Q4.
9. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 39
Nucor Corporation (NYSE:NUE) is an American company that specializes in the production of steel and other related products. The company is one of the best dividend stocks on our list as it has raised its payouts for 50 years consecutively. It currently pays a quarterly dividend of $0.51 per share for a dividend yield of 1.36%, as of March 27.
Credit Suisse sees strong earnings momentum for Nucor Corporation heading into Q2 due to pricing strength and strong end-market demand. In view of this, the firm raised its price target on the stock to $156 with an Outperform rating on the shares.
Of the 943 hedge funds in Insider Monkey’s database, 39 funds owned stakes in Nucor Corporation in Q4 2022. These stakes are collectively valued at over $551.3 million.
8. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 40
An American multinational automotive manufacturer, Ford Motor Company (NYSE:F) is next on our list of the best dividend stocks. In February, Barclays initiated its coverage on the stock with an Equal Weight rating and a $12 price target, appreciating the company’s strong performance over the years.
In the fourth quarter of 2022, Ford Motor Company posted revenue of $44 billion, which showed a 16.7% growth from the same period last year. The company pays a quarterly dividend of $0.15 per share and has a dividend yield of 5.19%, as of March 27.
At the end of December 2022, 40 hedge funds tracked by Insider Monkey reported having stakes in Ford Motor Company, compared with 47 in the previous quarter. These stakes have a total value of roughly $1.4 billion. Ken Griffin and D. E. Shaw were some of the company’s leading stakeholders in Q4.
7. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 46
Albemarle Corporation (NYSE:ALB) is a North Carolina-based chemical manufacturing company. On February 23, the company declared a 1.3% hike in its quarterly dividend to $0.40 per share. Through this increase, the company took its dividend growth streak to 29 years, which places it as one of the best dividend stocks on our list. The stock’s dividend yield came in at 0.73% on March 27.
Loop Capital lifted its price target on Albemarle Corporation to $403 in March with a Buy rating on the shares, presenting a positive outlook on the company’s business.
As of the close of Q4 2022, 46 hedge funds tracked by Insider Monkey were long Albemarle Corporation. The stakes owned by these funds have a total value of over $587.8 million.
Carillon Tower Advisers mentioned Albemarle Corporation in its Q4 2022 investor letter. Here is what the firm has to say:
“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The stock gave back some of its recent gains amid investor concerns about how the future price of lithium could be affected by a potential decelerating rate of growth in overall electric vehicle (EV) production and demand, primarily in China. Despite these potential near-term headwinds, longer-term the global lithium market remains tight, and Albemarle plays a critical role in the battery value chain and remains well-positioned for the overall continued global adoption of EVs.”
6. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 57
An American multinational fast food company, McDonald’s Corporation (NYSE:MCD) is one of the best dividend stocks with strong dividend growth streaks alongside The Coca-Cola Company, PepsiCo, Inc., and The Procter & Gamble Company. The company has raised its payouts for 46 years in a row and currently pays a quarterly dividend of $1.52 per share. The stock’s dividend yield on March 27 came in at 2.22%.
McDonald’s Corporation was a popular stock among elite funds in Q4 2022, with 57 hedge fund positions, up from 53 in the previous quarter, as tracked by Insider Monkey. These stakes have a total value of over $2.7 billion collectively.
5. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 62
The Home Depot, Inc. (NYSE:HD) is an American home improvement company, based in Georgia. In February, Truist maintained a Buy rating on the stock with a $352 price target, mentioning that the company’s sales trends remained strong in Q4.
The Home Depot, Inc. is one of the best dividend stocks on our list as it has raised its payouts for consecutive 13 years. It currently pays a quarterly dividend of $2.09 per share and has a dividend yield of 2.95%, as of March 27.
According to Insider Monkey’s Q4 2022 database, 62 hedge funds owned stakes in the company, with a total value of over $4.8 billion. With over 4 million shares, Citadel Investment Group was the company’s leading stakeholder in Q4.
Matrix Asset Advisors mentioned The Home Depot, Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
“During the quarter, we re-established a position in The Home Depot, Inc. (NYSE:HD) sold earlier this year, after the shares declined sharply on big picture concerns about a softer housing market and lower consumer spending. We believe that HD is a very well-managed company, positioned to continue showing good profits even as the economy decelerates. The products it carries in inventory are in year-round demand from contractors and homeowners wanting to maintain and improve their homes. The company has historically been shareholder friendly, repurchasing shares and increasing the dividend, most recently by 15% earlier this year. On September 30, HD’s current dividend yield was 2.8%.”
4. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 68
Lowe’s Companies, Inc. (NYSE:LOW) is an American home improvement company. It currently offers a quarterly dividend of $1.05 per share and has a dividend yield of 2.20%, as recorded on march 27. The company is one of the best dividend stocks on our list as it maintains a 59-year streak of consistent dividend growth.
Lowe’s Companies, Inc. remained popular among elite funds, as 68 funds in Insider Monkey’s database owned stakes in the company, up from 61 in the preceding quarter. The stakes owned by these hedge funds have a total value of nearly $5.7 billion.
3. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 69
The TJX Companies, Inc. (NYSE:TJX) is an American multinational off-price department store corporation. On February 22, the company announced a 12.7% hike in its quarterly dividend to $0.3325 per share. The stock has a dividend yield of 1.57%, as of March 27. Throughout the year, the company returned $3.6 billion to shareholders in dividends and share repurchases, which makes it one of the best dividend stocks on our list.
Baird presented a positive outlook of The TJX Companies, Inc. and lifted its price target on the stock to $90 in February, and maintained an Outperform rating on the shares.
The number of hedge funds tracked by Insider Monkey owning stakes in The TJX Companies, Inc. grew to 69 in Q4 2022, from 55 in the previous quarter. The collective value of these stakes is over $2.55 billion.
Artisan Partners mentioned The TJX Companies, Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“Also, shares of The TJX Companies, Inc. (NYSE:TJX), an off-price retailer of apparel and home goods across North America, Europe and Australia, rose on strong Black Friday sales and market share gains as shoppers searched for deals in physical stores. The company showed that it is maintaining margins and beating earnings estimates on strong sales and by selectively raising prices. TJX’s business model is to sell brand name and designer merchandise in limited quantities at every day discounted prices in stores with flexible, low-cost layouts. Its strategy is to tap into shoppers’ psychological need to “treasure hunt,” as the company describes it, to find unique, branded items at deep discounts. TJX buyers opportunistically purchase merchandise from vendors at deep discounts to keep the cost of goods low for stores. As the largest off-price retailer, the company has used its channel power to its advantage in recent months to gain steep discounts on merchandise as other retailers struggle to clear their inventory. We appreciate the company’s inventory management and pricing prowess. This holding is an example of our broad universe of companies that we consider for the portfolio and one that we believe is well-positioned for the current market environment.”
2. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 71
NIKE, Inc. (NYSE:NKE) is an Oregon-based footwear manufacturing company that also produces other accessories as well. Following the company’s recent quarterly earnings, Jefferies raised its price target on the stock to $160 in March and maintained a Buy rating on the shares.
NIKE, Inc., one of the best dividend stocks, currently pays a quarterly dividend of $0.34 per share. The company maintains a 21-year streak of consistent dividend growth. The stock has a dividend yield of 1.15%, as of March 27.
At the end of Q4 2022, 71 hedge funds tracked by Insider Monkey owned stakes in NIKE, Inc., up from 70 in the previous quarter. These stakes have a collective value of over $4 billion.
RiverPark Advisors mentioned NIKE, Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“NIKE, Inc. (NYSE:NKE) shares were a top contributor for 4Q as the company reported solid 2Q23 results and raised its annual guidance. Nike reported 17% revenue growth (27% on a currency neutral basis) and $0.85 EPS, both significantly greater than expectations. Management raised its F23 outlook to low teens currency-neutral revenue growth.
Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect gross and operating margin improvements as it shifts its product mix to more premium products and adopts a more direct to consumer approach, driving long-term mid-teens or higher annual EPS growth for the foreseeable future.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
An American multinational tech giant, Apple Inc. (NASDAQ:AAPL) ranks first on our list of the best dividend stocks from the consumer cyclical sector. The company has been raising its dividends consistently for the past nine years and currently pays a quarterly dividend of $0.23 per share. The stock has a dividend yield of 0.58%, as of March 27.
As of the close of Q4 2022, 135 hedge funds tracked by Insider Monkey reported having stakes in Apple Inc., with a total value of over $136 billion.
Distillate Capital mentioned Apple Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“The largest new purchase was Apple Inc., which after underperforming saw its valuation improve significantly. Over the course of the last year, Apple’s consensus estimated forward free cash flows rose modestly, while its enterprise value fell by around 30%. Apple ranks below the 25th most attractive name in the portfolio and so its weight is capped at 4% vs. 6% for names in the top quartile.”
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