The Best Dividend Stocks in the Consumer Discretionary Sector

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As we approach the holidays, many investors focus on consumer discretionary stocks. That is, companies that offer non-essential products and services. These companies tend to perform well during a strong economy, since consumers make these purchases based on their confidence in income.

Companies in the consumer discretionary sector could see positive performance during the holiday season, specifically companies in retail or directed related to retail.

The following companies are the stocks that are on my Top 100 Dividend Stocks list. These are considered the best dividend stocks within the sector.

Retail

Target Corporation (NYSE: TGT) is one of the most visible retailers during the holiday season. Last year, Target’s holiday sales increased from the year prior. For the 2016 season, Target recently boosted its guidance for the holiday season and for FY2016. Despite its higher outlook, Target has tough competition from companies like Wal-Mart (NYSE: WMT) and Amazon (NYSE: AZMN). Not only does Target have upside with its earnings, but it has a great dividend yield, too. Target currently has a dividend yield over 3% and has been boosting its dividend every year since 1968. The company will pay its next quarterly dividend of $0.60 on December 10. It is likely that Target will declare its next dividend in the middle of January. Earlier this year, Target increased its dividend 7% from $0.56. Target ranks 8 on our Top 100 Dividend Stocks list.

 

Gap Inc (NYSE: GPS) reported a plunge in earnings during its November earnings release. The apparel retailer has been closing stores as its struggles to compete with other apparel retailers within the industry. It also reported that it expects to have a difficult holiday season this year. The stock is up about 2% year-to-date. The Gap currently has a dividend yield of 3.65%, which is well above the average yield of other apparel retailers. The stock will pay its next $0.23 dividend on January 25. It will go ex-dividend on December 30. The company has been raising its dividend every year since 2010. The Gap ranks 11 on our Top 100 Dividend Stocks list.

 

Macy’s Inc (NYSE: M) reported lower sales and net income following last year’s holiday season. The department store retailer has publicly reported optimism for the upcoming holiday season with its new plan to manage inventory. Macy’s also reported its real estate deals with Brookfield Asset Management to expand its portfolio and help its bottom line. Macy’s currently has a dividend yield of about 3.55%, compared to the average yield in the industry of 2.8%. The company will pay its next $0.3775 dividend on January 3. The stock is going ex-dividend on December 13. Macy’s has been increasing its dividend every year since 2011, typically by over 20% annually. Macy’s ranks 24 on our Top 100 Dividend Stocks list.

 

L Brands Inc (NYSE: LB) has had a difficult year in 2016. The retailer, which is the parent company of Victoria’s Secret and Bath & Body Works, skyrocketed in 2014 and 2015, but has fallen nearly 25% this year. The company expects to have weak profits in the beginning of 2017 as a result the restructuring it has done with its Victoria’s Secret segment. L Brands currently offers a dividend yield of approximately 3.3%. The company paid its last $0.60 dividend on December 2. We expect the company to announce its next payout in February. It is likely that its next payout will be an increased dividend. The company may also pay a special dividend in March. L Brands ranks 55 on our Top 100 Dividend Stocks list.

 

Coach Inc (NYSE: COH) has had a decent year in 2016, increasing its share price about 15% year-to-date. The accessories company has struggled since its downfall in 2012, after it began discounting its products and losing its luxury image. Looking forward to the holiday season, Coach expects to see single digit growth for the fourth quarter.  Coach currently offers a dividend yield of 3.5%. The company will pay its next quarterly dividend of $0.3375 on January 3. The stock is going ex-dividend on December 7. We expect the company to declare its next quarterly dividend in February. The company has been holding its current dividend payout steady since 2013, without any cuts or increases. Coach ranks 63 on our Top 100 Dividend Stocks list.

 

Restaurants

The holiday season has the biggest impact on retail stocks, but restaurant stocks are an important part of the consumer discretionary segment. The following stocks are our top picks in the restaurants industry.

 

McDonald’s Corporation (NYSE: MCD) has skyrocketed since 2015. The fast food giant will likely benefit from the Trump Administration, which is expected to be beneficial to businesses. However, the company has struggled to grow and deal with the growing trend of healthy foods. The company has a dividend yield of about 3.15%. It will pay its next $0.94 on December 15. We expect the company to declare its next dividend at the end of January. MCD has been increasing its dividend every year since 1977. McDonald’s ranks 22 on our Top 100 Dividend Stocks list.

 

Darden Restaurants, Inc. (NYSE: DRI) is up over 20% in 2016. Darden, which is the parent company of Olive Garden and Longhorn Steakhouse, has benefited after selling Red Lobster. Darden currently offers a dividend yield of 2.9%. The company is expected to declare its next $0.56 dividend payout in the middle of December. In June, Darden increased its dividend payout by 12%. Darden ranks 23 on our Top 100 Dividend Stocks list.

 

Starbucks Corporation (NYSE: SBUX) has skyrocketed over the last five years, but has been down slightly in 2016. In December, the stock declined after a report that the company’s CEO, Howard Schultz, will be stepping down. Starbucks offers a dividend yield of about 1.75%. The coffee company paid its last $0.25 dividend on December 2 and is expected to declare its next dividend in April. The company recently increased its dividend from $0.20. Starbucks ranks 91 on our Top 100 Dividend Stocks list.

 

 

Shipping

 

United Parcel Service, Inc.(NYSE: UPS) In many cases, the holiday season can’t fully happen without the help of shipping companies like UPS. While it seems like guaranteed earnings for these companies during the holidays, it is often that profits are hurt by the increase in labor expenses. However, the company is optimistic that this holiday season will help its bottom line.  UPS has a dividend yield of about 2.7%. It paid its last $0.78 quarterly dividend on November 30 and is expected to declare its next dividend (which will likely be an increase) in February. UPS has been increasing its dividend every year since 2010.

 

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