Uncovering Income: Dividend Stocks with Strong Yields
Amid the current market volatility, attractive income-generating investments can be hard to find.
Treasury bond yields hover near record lows, and U.S. companies face restrictions on issuing dividends if they accept COVID-19 stimulus funds. Moreover, Goldman Sachs estimates dividends for S&P 500 stocks will decline by 25% this year.
Which stocks can investors turn to for stable distributions and relatively high dividend yields? Today’s visualization shows 35 stocks that may meet this criteria, leveraging Goldman Sachs data as published by Forbes.
The Dividend Stocks to Watch
To compile the list, Goldman Sachs identified stocks from the Russell 1000 index that met a number of requirements:
- A minimum annualized dividend yield of 3%
- An S&P credit rating of at least BBB+
- Ample cash on hand
- Strong balance sheets
- ”Reasonable” payout ratios
- At least average performance since the market peak
Dividend yields, which measure dividend income in relation to the share price, were initially calculated March 27. We have updated them as of market close on April 8. Here’s the full breakdown, sorted from highest to lowest dividend yield:
| Rank | Company | Ticker | Annual Dividend Yield | Sector |
|---|---|---|---|---|
| 1 | CenterPoint Energy, Inc. | NYSE: CNP | 6.90% | Utilities |
| 2 | Wells Fargo & Company | NYSE: WFC | 6.74% | Financials |
| 3 | People’s United Financial, Inc. | NASDAQGS: PBCT | 6.34% | Financials |
| 4 | Franklin Resources, Inc. | NYSE: BEN | 6.28% | Financials |
| 5 | Regency Centers | NASDAQGS: REG | 5.82% | Real estate |
| 6 | Truist Financial | NYSE: TFC | 5.50% | Financials |
| 7 | International Business Machines | NYSE: IBM | 5.43% | Tech |
| 8 | Omnicom Group Inc. | NYSE: OMC | 4.76% | Communication services |
| 9 | U.S. Bancorp | NYSE: USB | 4.71% | Financials |
| 10 | Raytheon Technologies (merger of Raytheon and United Tech.) | NYSE: RTX | 4.69% | Industrials |
| 11 | NetApp, Inc. | NASDAQGS: NTAP | 4.69% | Information Technology |
| 12 | The PNC Financial Services Group, Inc. | NYSE: PNC | 4.62% | Financials |
| 13 | Eaton Vance Corp. | NYSE: EV | 4.34% | Financials |
| 14 | Nucor Corporation | NYSE: NUE | 4.12% | Materials |
| 15 | United Parcel Service, Inc. | NYSE: UPS | 4.09% | Industrials |
| 16 | M&T Bank Corporation | NYSE: MTB | 4.09% | Financials |
| 17 | Exelon Corporation | NASDAQGS: EXC | 4.07% | Utilities |
| 18 | Archer-Daniels-Midland Company | NYSE: ADM | 3.95% | Consumer staples |
| 19 | 3M Company | NYSE: MMM | 3.95% | Industrials |
| 20 | Emerson Electric Co. | NYSE: EMR | 3.84% | Industrials |
| 21 | Sysco Corp. | NYSE: SYY | 3.81% | Consumer staples |
| 22 | Mid-America Apartment Communities | NYSE: MAA | 3.61% | Real Estate |
| 23 | Essex Property Trust, Inc. | NYSE: ESS | 3.55% | Real Estate |
| 24 | MDU Resources Group | NYSE: MDU | 3.53% | Utilities |
| 25 | Cummins Inc. | NYSE: CMI | 3.51% | Industrials |
| 26 | Sonoco Products Co. | NYSE: SON | 3.50% | Materials |
| 27 | Cisco Systems, Inc. | NASDAQGS: CSCO | 3.45% | Information Technology |
| 28 | American Electric Power Company, Inc. | NYSE: AEP | 3.36% | Utilities |
| 29 | The Hartford Financial Services Group, Inc. | NYSE: HIG | 3.36% | Financials |
| 30 | NiSource Inc. | NYSE: NI | 3.30% | Utilities |
| 31 | Caterpillar Inc. | NYSE: CAT | 3.23% | Industrials |
| 32 | Everest Re Group, Ltd. | NYSE: RE | 3.13% | Financials |
| 33 | Bristol-Myers Squibb Company | NYSE: BMY | 3.09% | Health care, pharmaceuticals |
| 34 | The Home Depot, Inc. | NYSE: HD | 3.08% | Consumer discretionary |
| 35 | Bank of America Corporation | NYSE: BAC | 3.07% | Financials |
Note: From the original list, 5 stocks have been excluded as they no longer meet the 3% annualized yield threshold.
Centerpoint Energy, an electric and natural gas utility company, is at the top of the list. Since utility stocks are generally considered to be recession-resistant, investors may benefit from both the company’s yield and its defensive qualities.
Financials are the most-represented sector, with 11 companies on the list. Although regulators have pressured European banks to suspend dividend payments, U.S. banks will likely be able to continue their distributions. Top banking executives have argued they have sufficient capital to weather the COVID-19 crisis, and that halting payments would be “destabilizing to investors.”
There are also a number of well-known names on the list, including Home Depot, IBM, and 3M. The latter is the largest maker of respirator masks worldwide, and has been providing critical supplies to the U.S., Canada, and Latin America.
Caution: Volatility Ahead
As the pandemic’s financial impact continues, it’s likely many companies will delay or suspend their dividends. To avoid falling into “yield traps”—a trap in which an attractive yield could be due to a fundamental business problem—investors can screen for the qualities laid out above.
A strong balance sheet, good credit rating, and average or better performance since the downturn can all help point towards stability.
