Which Of The 10 Best-Yielding S&P 500 Consumer Discretionary Companies Is Most Attractive To Dividend Investors?

by: Arie Goren

The consumer goods sector is quite a good performer so far in 2013. The total return, year to date (04/26/2013) was 13.6% while the appreciation of the S&P 500 index in the same period was 11.65%.

Stock Sectors' Total Returns, Year to Date, are shown in the chart below:

Source: finviz.com

In this article, I tried to determine which of the 10 best-yielding S&P 500 consumer discretionary companies is the most attractive for dividend-seeking investors, (sector classification is according to Portfolio123).

I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most crucial factors for dividend-seeking investors. Of course, it is also essential that a company has enough earnings growth prospects to maintain increasing dividend payments.

The 10 stocks are: Garmin Ltd (NASDAQ:GRMN), Cablevision Systems Corp (NYSE:CVC), Darden Restaurants Inc. (NYSE:DRI), Gannett Co Inc. (NYSE:GCI), Staples Inc. (NASDAQ:SPLS), Leggett & Platt Inc (NYSE:LEG), Hasbro Inc. (NASDAQ:HAS), Mattel Inc. (NASDAQ:MAT), GameStop Corp. (NYSE:GME) and McDonald's Corp (NYSE:MCD). All the data for this article were taken from Yahoo Finance and finviz.com on April 27.

The table and the charts below present the 10 consumer discretionary companies, their last price, the market cap, the forward annual dividend rate, the forward yield, the payout ratio and the average annual dividend rate of growth for the past five years.

The charts above emphasize the consistency of raising dividend payments during the last five years. The chart clearly shows that the GRMN, CVC, DRI, HAS, MAT and MCD have raised their payouts at a much higher rate than the other consumer discretionary companies in the last five years.

The charts below present the trailing P/E, forward P/E, the average annual earnings growth estimates for the next 5 years, the price-to-sales ratio and the price to book value of the 10 companies.


Among the 10 companies, the GRMN, CVC, DRI, HAS, MAT and MCD have raised their payouts at a much higher rate. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time.

The table below shows the most influential parameters, for dividend-seeking investors, for these six companies.


Which of the six companies is the most attractive for dividend-seeking investors? It is not easy to determine. All the six stocks look quite attractive to dividend-seeking investors due to their solid dividend and their long-term track record of consistent and rising dividend payments. Nevertheless, in my opinion, the Garmin stock is the best choice among the best-yielding S&P 500 consumer discretionary companies I reviewed for dividend-seeking investors, due to its higher yield and its good earnings and dividend growth prospects.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.