Many consumer discretionary stocks have underperformed this year as President Donald Trump has rolled out tariffs and consumer sentiment has tanked.

In fact, consumer discretionary is one of the year's worst performers in the S&P 500 index, losing 14% through March 31, including dividends. The sector is in the cellar along with technology stocks.

"The biggest issue is just day-to-day uncertainty in how people's wallets are going to be affected by changes to the administration's policies," says Jaime Katz, a senior equity analyst at Morningstar who follows consumer discretionary stocks.

University of Michigan data showed that consumer sentiment dropped by 11.9% in March from a month earlier. It marked the third straight monthly decline of that widely followed index.

"Consumers continue to worry about the potential for pain amid ongoing economic policy developments," according to a statement accompanying the survey.

For income investors, however, all is not lost in this sector. Companies such as Home Depot, Lowe's and Tractor Supply all sport decent yields that are growing and undergirded by strong cash flow.

"The consumer is in better shape than the headlines out there indicate," says Stephanie Link, chief investment strategist at Hightower Advisors. "The reason is because they still have jobs."

Link points out that personal income in February increased by 0.8% versus January, higher than expected. The savings rate has edged up to 4.6%.

U.S. consumers, she adds, are in solid shape to weather a slowdown, even if gross-domestic-product growth slips to 1%. Link, however, doesn't expect the economy to dip that far.

Shares of home-improvement retailer Home Depot, which yields 2.5%, have returned about minus 5% year to date.

Katz says "there should be no issues paying the dividend" for Home Depot. And the company "throws off a ton of cash flow, and they do have a rising top line."

That cash flow enabled Home Depot to pay $8.9 billion worth of dividends in its most recent fiscal year, which ended in early February, compared with about $8.4 billion the previous year.

The company has been integrating its $18 billion acquisition of SRS Distribution, a building products distributor, since last year.

In an encouraging sign, Home Depot's same-store sales turned positive in the most recent quarter for the first time in two years.

Link says Home Depot has a solid business with great execution. Plus, "margins will expand once they integrate this SRS acquisition."

The company in February said that it would boost its quarterly disbursement to $2.30 a share, up 2% from $2.25.

Lowe's, Home Depot's big rival in home improvement, yields 2%, below the 2.5% for Home Depot. Lowe's shares are down about 5% year to date.

Like just about every company in this sector, Lowe's is feeling the consumer's caution. In a recent call with analysts, CEO Marvin Ellison warned of "near-term pressure on [do-it-yourself] discretionary spending, particularly in bigger-ticket projects."

The company's quarterly dividend, however, remains steady at $1.15 a share. It boosted it by 15% nearly a year ago from $1 a share.

Tractor Supply, a national chain of stores selling farm and ranch products to retail customers, yields a respectable 1.7%. The shares returned about 4% in the first quarter.

The company recently increased its dividend by 4.5%, to 23 cents a share from 22 cents, marking the 16th straight year that it has boosted its disbursement.

"They've been very good capital allocators," says Katz. "They've systemically bought back shares, paid their dividend, and invested in the business."

Link's other consumer discretionary holdings include the specialty retailer Gap, whose stock fell 12% in the first quarter. It yields 3.2% and trades at about nine times forward earnings, according to FactSet.

Link cites key changes, such as a move to revive and sharpen company brands Banana Republic, Old Navy, Gap, and Athleta under the watch of the company's relatively new CEO, Richard Dickson.

Dickson was named to the job in July of 2023, having been recruited from Mattel, where he was chief operating officer.

"It's a show-me story. It's a turnaround. You have got to believe in Richard Dickson, and I do," Link says.

The company in February declared a quarterly dividend of 16.5 cents a share, up 10%.

At 4.5%, toy maker Hasbro sports one of the higher yields in the consumer discretionary sector. And the stock has handily outperformed the S&P 500 in this year's first quarter, with a total return of 11%, versus minus 4% for the broader market.

Hasbro in February reported 2024 earnings of $4.01 a share, surpassing FactSet's consensus estimate of $3.87.

Revenue fell by roughly $900 million, to about $4.1 billion, last year, owing in no small part to the sale of media assets, says Katz of Morningstar.

She points out that the company sold the Entertainment One film and TV business to Lionsgate to focus more on its toys and digital games segments. That deal, whose price tag was $375 million, closed at the end of 2023.

"Now they are at this place where they can really start to monetize their games business, which includes Wizards of the Coast, Dungeons and Dragons," and other businesses, says Katz. "Those are very high-margin businesses for them."

The company has been holdings its quarterly dividend stable at 70 cents a share since 2022. The dividend yield should help as a buffer if the stock hits more volatility.