The consumer discretionary sector includes companies selling non-essential goods, such as luxury goods, automobiles, entertainment, retail, residential home construction, restaurants, and travel. Consumer discretionary companies tend to be highly cyclical, benefiting most when consumer spending is strong. The sector is alternatively known as the consumer cyclical sector, depending on the classification system.

Consumer discretionary stocks can be less reliable investments for dividend investors when compared to more defensive sectors, such as consumer staples. However, well-established, maturing brands with strong cash flows offer share upside and dividend growth potential.

This consumer discretionary stock list is composed of companies traded on the NYSE or NASDAQ, many of which are S&P 500 constituents.

Using our lists to find consumer discretionary dividend stocks

We built our customizable stock lists to simplify finding the best consumer discretionary stocks to invest in. While our insights are biased toward dividend investors, we include key overall sector metrics that all investors can use to analyze stocks.

Researching each stock’s price-to-earnings (P/E), debt-to-equity (D/E), dividend yield, payout ratio, and various free cash flow analytics can help investors determine a given stock’s valuation, financial performance, capitalization, and competitive positioning.

Our separate side-by-side stock comparison tool is also useful for analyzing essential stats for a hand-picked selection of stocks.

Industries

Due to the sheer size of this globally-driven sector, the consumer discretionary sector has one of the longer lists of industries, including the primary ones below.

• Apparel footwear and accessories: Includes global brands and retailers producing and selling clothing, shoes, and fashion accessories.
• Apparel retail: Companies that sell clothing, footwear, and accessories directly to consumers through physical stores or online platforms.
• Apparel manufacturing: Businesses that design, produce, and distribute clothing, footwear, and textiles for retail and wholesale markets.
• Auto dealerships: Retail businesses that sell new and used vehicles, provide financing, and offer maintenance services.
• Auto manufacturers: Companies that design, produce, and distribute passenger cars, trucks, and electric vehicles for global markets.
• Auto parts: Manufacturers and suppliers of components, replacement parts, and vehicle accessories, serving automakers and aftermarket retailers.
• Department stores: Large retailers that sell various goods, including apparel, home goods, and electronics, under one roof.
• Furnishings, fixtures, and appliances: Companies that manufacture and sell home furniture, lighting, kitchen appliances, and décor products.
• Gambling, resorts, and casinos: Businesses that operate casinos, hotels, and entertainment resorts, generating revenue from gaming, lodging, and hospitality services.
• Home improvement retail: Retailers specializing in home renovation products, tools, and services catering to homeowners and contractors.
• Leisure: Companies offering entertainment, recreational, and outdoor activity products and services, including theme parks, cruises, and fitness centers.
• Luxury goods: High-end brands producing premium fashion, accessories, jewelry, and watches, often with strong brand loyalty and pricing power.
• Packaging and containers: Companies that manufacture packaging materials, such as boxes, bottles, and cans, used across various industries.
• Personal products and services: Includes companies producing personal care products, cosmetics, hygiene goods, and related services.
• Recreational vehicles: Companies that produce and sell motorhomes, campers, and trailers for leisure travel and outdoor activities.
• Residential construction: Homebuilders that develop and construct single-family and multi-family residences for buyers and real estate investors.
• Restaurants: Businesses that prepare and serve food and beverages, ranging from fast food chains to fine dining establishments.
• Specialty retail: Niche retailers that focus on specific product categories, such as electronics, sporting goods, pet supplies, or office products.
• Travel lodging: Hotels, resorts, and vacation rental companies that provide short-term accommodations for travelers and tourists.
• Travel services: Companies offering travel booking, airline ticketing, and tourism-related services, including online travel agencies and tour operators.

How to invest in consumer discretionary stocks

Pros of the sector

• Leading companies possess brand loyalty and pricing power
• Long-term growth prospects in growing economies
• E-commerce and digital transformation growth
• Global expansion
• Limited regulatory risk

Cons of the sector

• Highly cyclical with ties to consumer spending increasing recession risk
• Changing consumer trends
• Low dividend yields with limited dividend-paying companies

Consumer discretionary ETFs are a popular investment vehicle for diversification and broad sector-wide exposure. However, many buy-and-hold investors directly invest in select companies they think can outperform the market or sector.

When investing through direct stock ownership, it’s important to pay attention to several key valuation, dividend, and overall financial performance metrics.

Valuation and fundamental analysis

Many established consumer discretionary companies generate consistent profitability, meaning P/E can be a reliable sector-wide valuation ratio in boom and bust cycles.

P/E can also be useful for more growth-oriented consumer cyclical stocks reinvesting profits. However, price-to-sales (P/S) may be a better valuation ratio that better accounts for revenue growth prospects.

Fundamentals such as return on equity (ROE) and debt-to-equity (D/E) are especially important metrics in the sector. D/E provides a glimpse into a company's capital structure and a reliable way to assess whether a company carries too much debt compared to peers.

ROE provides competitive advantage insights by assessing a company’s ability to generate earnings from shareholder equity, offering a multi-faceted view of profitability, pricing power, capitalization, and brand loyalty.

Macroeconomic considerations

Since the consumer discretionary sector is highly cyclical, a long-term investing strategy plays a critical role. Weathermen make economists look good, so there’s little value in trying to time a bottom trading in and out of stocks.

Dollar-cost-averaging is a more reliable approach for stocks in the sector since it removes the uncertainty of timing highs and lows.

Similarly, too high of a concentration in the sector can expose an otherwise diversified portfolio to big drawdowns when consumer appetite changes or disappears. Diversification within the sector and across other sectors is key to limiting portfolio risk when an inevitable boom cycle shifts downward.

Popular consumer discretionary dividend stocks

Consumer discretionary dividend yields are comparably low contrasted with many other sectors, yet several dividend investor favorites find a home in the sector. Home Depot Inc. (HD), McDonald’s Corporation (MCD), Starbucks Corporation (SBUX), and Lowes Companies Inc. (LOW) are some of the most popular names residing in US income investors' portfolios.

Popular consumer discretionary ETFs

The Consumer Discretionary Select SPDR Fund (XLY), Vanguard Consumer Discretionary ETF (VCR), and Fidelity MSCI Consumer Discretionary Index ETF (FDIS) are a handful of popular consumer discretionary ETFs offering low-cost sector-wide exposure.