With many investors nervous about the market after two 10% corrections in the past year, the consumer staples stocks have run up big and are now trading at high multiples. The consumer discretionary stocks on the other hand have suffered and are far cheaper on a multiple basis. Many on Wall Street think they are solid buys and underappreciated.

One firm we cover here at 24/7 Wall St. is UBS, which is cautiously positive on the overall sector. The firm sees the sector as moderately overweight, and the analysts are attracted to the companies with strong brands and content with pricing power, as well as to the companies that are aligned to the needs and spending trends of the millennial consumer, which they see as a driving economic force for years to come.

We found four stocks in the Most Preferred Consumer Discretionary category that pay top dividends and are also offering investors solid entry levels.

Walt Disney

This entertainment giant has suffered this year, as many have worried about subscriber losses at ESPN. Walt Disney Co. (NYSE: DIS) operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels, and ABC Family, as well as UTV/Bindass and Hungama.

The company also owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Disney Resort & Spa in Hawaii; Disney Vacation Club, Disney Cruise Line and Adventures by Disney; and Disneyland Paris, Hong Kong Disneyland Resort and Shanghai Disney Resort. It also licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan.

In addition to opening a brand new $3 billion theme park in Shanghai, China, the company also recently announced that Netflix had reached an exclusive deal with Disney giving it streaming rights to Disney films, a win-win for both companies.

Disney shareholders are paid a 1.4% dividend. The Thomson/First Call consensus price target is posted at $110.11. The stock closed Tuesday at $99.22.

Home Depot

This company remains the undisputed leader in the home improvement retail category. The Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Home Depot stores sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me (DIFM), and professional customers.

With the mild winter due to the El Niño effect, and spring in full bloom, some people think that can be a benefit to Home Depot and other home improvement companies. In addition, the continued strength in the housing market could also bode well for the company. Earnings per share gains have consistently been in the 15% to 20% range and a consensus of analysts is forecasting earning increases to continue to grow at about 15% annually for another two to three years.

Home Depot investors are paid a 2.09% dividend. The consensus price objective is $147.41. Shares closed Tuesday at $132.12.
McDonald’s

The fast-food giant has been on fire over the past six months, but it still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.

Wall Street as a whole is very pleased with the efforts from new CEO Stephen Easterbrook. He is taken the bull by the horns with a strategic corporate reset by changing the menu, updating the hours breakfast is served and modernizing the restaurants. Management prioritized that dividend growth as a key element of its shareholder value proposition. McDonald’s has increased its dividend every year for the past 39 years.

The company reported outstanding first-quarter results in April, generating higher sales, revenues and operating income in constant currencies across all business segments. Hedge funds are very bullish on the company as a total of 20 own the stock.

McDonald’s investors are paid a solid 2.92% dividend. The consensus price target for the stock is $132.14 The stock closed most recently at $122.06.

Williams-Sonoma

This specialty retailer of high-quality products for the home has been hit hard and is offering investors an outstanding entry point. Williams-Sonoma Inc. (NYSE: WSM) products, representing eight distinct merchandise strategies — Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams-Sonoma Home, Rejuvenation, and Mark and Graham — are marketed through e-commerce websites, direct mail catalogs and 618 stores.

The company also currently operates in the United States, Canada, Australia and the United Kingdom, offers international shipping to customers worldwide and has unaffiliated franchisees that operate stores in the Middle East and the Philippines, as well as stores and e-commerce websites in Mexico.

Despite posting solid first-quarter numbers recently, its shares are down over 40% from highs that were printed last summer. While some analysts worry about competition, the increase in new and previously owned home sales bodes well for the company going forward. CNBC’s Jim Cramer is also a big fan of the stock.

Shareholders are paid a solid 2.8% dividend. The consensus price target is $60.43, and the shares closed most recently at $53.04.

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The consumer discretionary stocks have underperformed in relationship to consumer staples, and it could be time for the sectors to reverse. These stocks all make good sense for growth portfolios with a longer time horizon.

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