Jim Cramer Says A Consumer Rebellion Is Coming, That Could Be Good News For These Dividend Stocks

Even as inflation finally seems to be cooling, there are signs that price fatigue is starting to hit consumers where it counts – in their wallets. As inflation rose, some companies were able to increase prices, while other consumer goods companies trimmed the size of their packages, a process known as shrinkflation. 

CNBC's Jim Cramer believes that consumers are ready to fight back, and their spending habits could change the trajectories of quite a few stocks. "Consumers, at last, are finally saying no. They are pushing back, demanding bargains," said Cramer on a recent episode of Mad Money. Cramer's point of view is that some of the hotel and travel stocks may have tough times ahead, calling recent earnings "signposts of a rebellion" that is emerging in consumer behavior. He called out the recent disappointing theme park traffic from Comcast CMCSA as another sign that people are no longer spending like they did in 2022. 

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Cramer also cited major consumer brands, including Nike NKE and Estee Lauder EL, as examples of companies that may be too pricey to appeal to consumers right now. He predicted that this is the beginning, not the end, and that the consumer would take revenge against all who kept prices high. That could be encouraging news for several dividend-paying companies that appeal to value-conscious consumers. 

Where The Values Are

Over the past six months, many companies have become increasingly aware of dissatisfied shoppers and are pricing accordingly. That could be good for their bottom line. 

One of the biggest beneficiaries of price sensitivity is Walmart WMT. The company has stepped up the pace of its rollbacks and price cuts on many of its most popular products. This approach isn't just connecting with Walmart's traditional base. The company is attracting a broader audience to its stores. On the most recent earnings call, Walmart's Chief Financial Officer John David Rainey pointed out how Walmart connects with a larger audience. "We’re seeing higher engagement across income cohorts with upper-income households continuing to account for the majority of the share gains."

Walmart's total revenues were up 5.8% in the past quarter. While its dividend yield is just 1.18% and the annual dividend is $0.83, the company's payouts are consistent. It achieved Dividend King status in 2024, raising its dividend for an impressive 51 years. Walmart repurchased $1.1 billion in shares during the last quarter. We expect to hear more about Walmart's pricing strategy when it reports earnings on August 15. 

Another company appealing to value shoppers is McDonald’s MCD. The company plans to keep its $5 value meal offer beyond its four-week test. The test performed well with consumers, driving more people to the restaurants. The meal offers a sandwich, chicken nuggets, french fries, and a drink. In the last quarter’s earnings release, CEO Chris Kempczinski summed up the situation, saying, "As consumers are more discriminating with every dollar that they spend, we will continue to earn their visits by delivering leading, reliable, everyday value and outstanding execution in our restaurants." McDonald's has had 13 consecutive quarters of sales growth. The company has a forward dividend yield of 2.64% and pays an annual dividend of $6.68. We will likely hear more about the effectiveness of the value menu pricing during the earnings call on July 29. 

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In May, Target TGT announced it cut prices on over 5,000 items. On Target's first quarter earnings call, CEO Brian Cornell stressed the importance of this strategy, saying, "While our team is always committed to value, it’s particularly important in today’s environment, as consumers look for ways they can stretch their budgets in the face of stubbornly high prices."

Target's comparable sales were down 3.7% in the first quarter, and the company has struggled with the perception that it is more expensive than other options. One of its biggest pushes has been revamping the Target Circle loyalty program and promotions like Target Circle Week. With the big back-to-school shopping season beginning, we can expect Target to work hard to deliver the savings message to consumers. Target announced lifting its quarterly dividend to $1.12, an increase of 1.8%. It currently has a forward dividend yield of 3.06% with an annual dividend of $4.48.

Cramer cited Costco, Walmart, and Amazon as potential beneficiaries of the consumer revolution, but many other companies can benefit from being more sensitive to their customers’ needs. As investors, we will want to pay attention to their moves because some companies that don't heed the call of the cash-strapped shopper may be left behind. 

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