3 High-Dividend Consumer Stocks Yielding Over 5%

Consumer discretionary stocks are broadly appealing for income investors. These companies manufacture products that tend to see steady demand, even during recessions.

As a result, many consumer discretionary stocks have the ability to pay high dividend yields, and maintain their dividends during recessions.

Let's take a look at three stocks that we think screen very well for income investors based upon their combination of high current yields, and future growth potential.

Give This Dividend Stock a 'Whirl'

Whirlpool Corp. WHR is a leading home appliance company with well-known brands like Whirlpool, KitchenAid, and Maytag. Roughly half of the company’s sales are in North America, but Whirlpool does business around the world under 12 principal brand names.

On April 24, Whirpool reported first-quarter results. For the quarter, sales came in at $4.49 billion, down 3.4% compared to the 2023 first quarter. Ongoing earnings per diluted share was $1.78 in the quarter, 33% below last year’s $2.66 per share.

Whirlpool reaffirmed its 2024 guidance, which sees ongoing EPS coming in at a midpoint of $14.00 on revenue of $16.9 billion. Additionally, Whirlpool expects cash provided by operating activities to total roughly $1.2 billion, with $600 million in free cash flow.

Over the long-term Whirlpool continues to have opportunities in the way of the potential for margin improvement and a strong share repurchase program over time. We see the impressive earnings result in 2021 as a cyclical peak, and from a more normalized 2024 forecast of $14.00 per share, we expect 3.0% EPS growth through 2029.

Whirlpool has strong brands, and its competitive advantages include its global presence and a strong control over its costs, which is why the company generates significantly higher margins than its peers.

The company’s forward payout ratio of 50% is now exceeding management’s long-term goal of 30%, so we are not anticipating much in the way of dividend growth. Still, with a 7.8% current yield, this component adds nicely to shareholder returns, even as the company prioritizes debt repayment to dividend hikes.

Moreover, the low dividend payout ratio allows for greater flexibility, without the need for dilutive action in lesser times.

Drive a Model 'D'

Ford Motor Co. F was first incorporated in 1903 and in the past 120 years, it has become one of the world’s largest automakers. It operates a large financing business as well as its core manufacturing division, which produces a popular assortment of cars, trucks, and SUVs. Ford could produce $170+ billion in revenue this year.

Ford posted first-quarter earnings on April 24, and results were better than expected on both the top and bottom lines. Adjusted EPS came to 49 cents, which was a nickel ahead of estimates. Revenue was up 3.2% year over year to $42.8 billion, which was $1.31 billion better than expected. The company’s Pro division, which sells commercial vehicles, was once again a very bright spot, with revenue soaring 36% higher year over year.

Earnings before interest and taxes more than doubled as high demand for work trucks transit vans, and even software drove outstanding earnings. The Blue division, which sells conventional cars and trucks, saw continued strong demand and growth of ~40% in hybrid vehicle volumes. 

Guidance for the year is expected to be ~$12 billion in adjusted EBIT, adjusted free cash flow of ~$7 billion, and capex of between $8 billion and $9 billion. Cost savings are expected to be about $2 billion, which will help offset some of the investment required for the company’s struggling electric vehicle division.

Ford’s EV efforts are a struggle as margins remain very deep in negative territory, with no signs of improvement. That said, Ford’s legacy Blue and Pro divisions are highly profitable and Ford therefore has plenty of liquidity to fund its EV expansion for years to come. Ford can achieve future growth mostly from margin gains as it shifts its mix to more profitable vehicles over time. Ford will also benefit from the cost savings program it has in place.

Ford is back to paying its dividend steadily, which is a great sign of confidence from management. The payout ratio is just 30% of earnings, so even a downturn in earnings shouldn’t put the payout at risk. This excludes supplementary dividends paid. 

Ford stock currently yields 5.1%.

A Childrenswear Company With a Grown-Up Yield

Carter's, Inc. CRI is the largest branded retailer of apparel exclusively for babies and young children in North America. It was founded in 1865 by William Carter. The company owns the Carter's and OshKosh B'gosh brands, two of the most known brands in the children's apparel space. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through nearly 1,000 company-operated stores in the United States, Canada, and Mexico and on its online websites.

On April 26, the company reported first-quarter results for fiscal year 2024. The company experienced a drop in net sales to $661 million, down from $696 million in Q1 2023, although diluted EPS improved to $1.04 from $0.95. The company also returned $38 million to shareholders. Looking ahead to FY 2024, it forecasts net sales between $2.95 billion and $3.0 billion, expecting mid-single-digit growth in adjusted operating income and low to mid-single-digit growth in adjusted diluted EPS.

Some of the growth prospects that will drive higher revenue and earnings will be that the company continues to lead in eCommerce. Over the next five years, the company expects eCommerce sales to grow to nearly 50% of its total U.S retail sales. Another growth driver will come from the company's "Age Up" initiative. This initiative focuses on apparel sales for children ages four to 10 years old. This older age apparel market is larger than the combined baby and toddler apparel markets. Over the past 10 years, earnings have had a compound annual growth rate of 5.2%.

Carter's has a competitive advantage in its brand and its agreement with Target TGT, Walmart WMT, and Amazon AMZN to sell exclusive brands in those companies. This allows the company to reach a broad range of consumers worldwide.

With a dividend payout ratio of 52% for 2024, the dividend appears secure. 

CRI stock yields 5.1%.

At the time of publication, Ciura had no positions in any stocks mentioned.