The consumer discretionary sector contains companies offering goods and services that are discretionary (non-essential) for their customers. Consumer discretionary companies run businesses such as retail stores, casinos, restaurants, travel, entertainment, toys, and autos.
The discretionary sector offers high potential investment returns because discretionary companies often have higher growth rates than seen in other sectors of the stock market. However, it also presents more investment risk as the sector is more sensitive to changes in the overall economy.
Generally speaking, consumer stocks will do well in a rising economy when consumers have surplus disposable income, but they suffer more than other sectors during a recession, when consumers are forced to cut out unnecessary spending.
This makes sense, as people will continue paying their water and electric bills (Utility & Water Sector), buy groceries (Consumer Staples Sector), and take their medications (Healthcare Sector) during a recession. However, they forego other luxury spending if finances require it.
This relationship is clear when looking at the sector returns over the last decade (courtesy of Novel Investor):
You can see that the S&P 500 Consumer Discretionary Index outperformed the index in nine of the last fifteen years, going back to 2011. However, it did lag the “safe” sectors such as Consumer Staples, Health Care, Utilities, and Telecommunications during the weak S&P years of 2011 and 2022.
Overall, it was the second-best performer among all sectors, as its 14.72% annualized return trailed only the information technology sector’s 20.75%.
Finding the right consumer discretionary stock and holding it for the long-term can be very rewarding.
Consumer Discretionary Stock Examples
With the overall outperformance by the discretionary sector, one would expect to find some successful companies in the group. The key is identifying those companies early in their growth phase and then holding them for long periods, as this can create some outstanding total returns on your investment.
Two standout long-term compounders in this sector are Starbucks (SBUX) and Lowe’s (LOW). Both have demonstrated the power of consistent earnings growth combined with dividend reinvestment over multi-decade periods.
These long-term F.A.S.T. Graph charts show what potential exists when buying early in a growth cycle.
Starbucks Corporation (SBUX)
Starbucks has been around for a long time, continuously expanding its reach as the dominant name in the coffee business. In doing so, it grew earnings at a greater than 21% annualized rate from 1998 to 2018.
Notice that the only year Starbucks did not have positive growth was in 2008 during the “Great Recession”, which reinforces the point that consumer discretionary stocks are impacted by the overall economy.
This secular growth story resulted in outstanding total returns for early buyers of the stock, turning a $10,000 investment into a $235,000 nest egg with dividends reinvested.
Lowe’s Companies Inc. (LOW)
Lowe’s Companies is another consumer discretionary company that has performed well, growing earnings at a 15%+ annual rate over the same period.
However, Lowe’s is a home improvement store, so its business is more affected by a weak economy. This was seen during the 2008 Great Recession, when the housing market crashed and caused Lowe’s earnings to decline.
As the F.A.S.T. Graph below shows, Lowe’s had negative earnings for 2008, 2009, and 2010 before returning to strong growth from that point forward. This differs from Starbucks, which saw just one year of negative earnings growth.
However, despite those few years of negative growth, the overall high earnings growth rate resulted in 15.8% annualized total returns, turning a $10,000 investment into $191,532 over two decades with dividends reinvested.
Not only did Starbucks and Lowe’s offer high capital gains returns, but they also rewarded investors with a steadily increasing dividend, which resulted in some impressive yield on cost “YOC” numbers at the end of the period.
Investors who bought Lowe’s at the start of the period were receiving 34% of their initial capital back in dividend payments after 20 years, and for those in Starbucks, nearly 36%.
This high income return comes despite low or non-existent yields at the time of initial purchase. Dividend reinvestment plus high growth rates can create some impressive compounding over the years!
Top DGI Stocks From The Consumer Discretionary Sector – 2026 Update
Starbucks and Lowe’s are just two examples, but there are plenty of other excellent companies in the sector. The type of companies that have produced long track records of earnings and dividend growth, and high total returns for shareholders.
Over the years, I’ve used screening tools focused on long histories of dividend increases (drawing from U.S. Dividend Champions and similar methodologies) to build sector-specific watch lists. These lists help me — and hopefully you — quickly compare quality companies on metrics that matter for long-term retirement income: years of consecutive increases, distance from 52-week highs/lows, current yields, recent dividend growth, and trailing 5- and 10-year dividend CAGRs.
The consumer discretionary sector can be more cyclical than staples or utilities, but it also contains some of the best long-term compounders when you buy quality names at reasonable valuations. Focusing on companies with proven dividend growth streaks gives you a margin of safety and a growing stream of passive income over time.
Updated Watch List (as of June 20, 2026)
I’ve refreshed the full watch list with the latest market prices, dividend data, and growth metrics. The table includes color-coded highlights to make it easy to spot opportunities (e.g., stocks trading well off their highs or those with particularly strong multi-year dividend growth).
Here is the PDF version of the consumer discretionary stock list.
Quick highlights from the current list:
- Genuine Parts Co (GPC) — 70 years of consecutive dividend increases (true Dividend Champion territory in the auto parts space).
- Lowe’s (LOW) — 64 years of increases and one of the strongest 10-year dividend CAGRs on the list (~16.5%).
- McDonald’s (MCD) — 50 years of dividend growth with global brand durability.
- Restaurant names showing resilience and growth: Domino’s (DPZ), Darden (DRI), Texas Roadhouse (TXRH), Wingstop (WING), and Yum Brands (YUM).
- Retail strength: Dick’s Sporting Goods (DKS) with impressive recent growth rates, TJX Companies, Ross Stores (ROST), and Williams-Sonoma (WSM).
These names can serve as a ready-to-use shopping list when you have fresh capital or want to add exposure to the sector alongside more defensive holdings.
Related Sector Watch Lists (great for building a diversified DGI portfolio):
It has been a while since I’ve updated my thoughts on the discretionary stocks, but here is a link to the original article on Seeking Alpha from December 1, 2015.
Top 10 Consumer Discretionary Stocks For Dividend Growth And Income
Which consumer discretionary dividend growth stocks are you watching or already holding in your retirement portfolio? Drop your thoughts in the comments or on social media — I read every one, and it helps the whole community.
If you found this updated watch list helpful, consider subscribing for future sector updates and portfolio insights. Building a growing stream of dividend income takes time and discipline, but the long-term rewards for patient DIY investors are worth it.
Return to Sector Watch Lists.
For informational purposes only. Always do your own due diligence. Past performance is not indicative of future results. Data sourced from publicly available information as of June 20, 2026.