GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (2024)

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Christopher Competiello

2020-03-31T12:56:00Z

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (1)

Cole Hunter, the vice president of US portfolio strategy at Goldman Sachs, set out to find dividend stocks that are highly reliable, cash-heavy, and high-yielding in the wake of the coronavirus-induced sell-off.
He said income-oriented investors may want to consider stocks with high dividends and strong capacities that continuously spit out cash in a world where 10-year US Treasury bonds are yielding peanuts.
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As markets ebb and flow with the latest coronavirus developments, income-oriented investors may be starting to question how safe their dividend streams are.

After all, companies like Boeing (BA), Delta Air Lines (DAL), Ford (F), Marriott (MAR), and Macy's (M) have already suspended their dividend payments.

Normally, investors could seek solace in traditional safe-haven investments like US Treasurys. But today, the prevailing interest-rate environment is anything but normal.

"With 10-year US Treasury yields at 0.8%, income-seeking investors should consider stocks with both high dividend yields and the capacity to maintain the distributions," Cole Hunter, the vice president of US portfolio strategy at Goldman Sachs, said. "We forecast S&P 500 dividends will decline by 25% to $44 per share in 2020."

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Hunter provided the following charts for reference. The chart on the left shows Goldman's annual earnings-per-share and dividends-per-share estimates for 2020 and 2021. The chart on the right shows Goldman's estimates for earnings and dividend growth in 2020 with the financial crisis (red) and Great Depression (light blue) highlighted for historical reference.

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (5)

With a sizable drawdown in dividends and earnings looking increasingly likely to Hunter, he set out to pin down stocks with dividends that were shielded from the mayhem. He scoured the Russell 1000 and employed a plethora of quality-focused metrics to arrive at his choices.

Here are the criteria he established his search upon. The median stock on his list has the following characteristics:

"An investment-grade issuer rating of A-."
"A track record of 90 consecutive quarters (23 years) of dividend payments without a cut."
"A dividend yield ranking in the 94th percentile compared with how the shares have traded during the past 40 years."
"A 47% dividend payout ratio using realized 2019 EPS that translates into a 'shocked' payout ratio of 71% after reducing last year's earnings by 33%."
"An equity cap of $23 billion vs. $8 billion for the index."
"Trades at a trailing 12-month P/E multiple of 11x vs. 14x for the typical Russell 1000 company."

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By leveraging this methodology, Hunter arrived at 15 selections with "high dividend yields, ample cash, healthy balance sheets, and reasonable payout ratios."

Listed below are the 15 stocks he identified, ranked in increasing order of annual dividend yield.

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15. Emerson Electric

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (6)

Ticker: EMR

Annual dividend yield: 4.4%

Consecutive quarters without a dividend cut: 156

Source: Goldman Sachs Global Research

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14. 3M

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (7)

Ticker: MMM

Annual dividend yield: 4.4%

Consecutive quarters without a dividend cut: 156

Source: Goldman Sachs Global Research

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13. PNC Financial

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (8)

Ticker: PNC

Annual dividend yield: 4.6%

Consecutive quarters without a dividend cut: 39

Source: Goldman Sachs Global Research

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12. Eaton Vance

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (9)

Ticker: EV

Annual dividend yield: 4.6%

Consecutive quarters without a dividend cut: 81

Source: Goldman Sachs Global Research

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11. US Bancorp

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (10)

Ticker: USB

Annual dividend yield: 4.7%

Consecutive quarters without a dividend cut: 40

Source: Goldman Sachs Global Research

10. NetApp

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (11)

Ticker: NTAP

Annual dividend yield: 4.8%

Consecutive quarters without a dividend cut: 26

Source: Goldman Sachs Global Research

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9. Nucor

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (12)

Ticker: NUE

Annual dividend yield: 4.8%

Consecutive quarters without a dividend cut: 41

Source: Goldman Sachs Global Research

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8. Omnicom Group

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (13)

Ticker: OMC

Annual dividend yield: 5%

Consecutive quarters without a dividend cut: 50

Source: Goldman Sachs Global Research

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7. Truist Financial

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (14)

Ticker: TFC

Annual dividend yield: 5.4%

Consecutive quarters without a dividend cut: 39

Source: Goldman Sachs Global Research

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6. Regency Centers

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (15)

Ticker: REG

Annual dividend yield: 5.9%

Consecutive quarters without a dividend cut: 39

Source: Goldman Sachs Global Research

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5. IBM

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (16)

Ticker: IBM

Annual dividend yield: 6%

Consecutive quarters without a dividend cut: 102

Source: Goldman Sachs Global Research

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4. People's United Financial

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (17)

Ticker: PBCT

Annual dividend yield: 6.1%

Consecutive quarters without a dividend cut: 105

Source: Goldman Sachs Global Research

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3. Franklin Resources

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (18)

Ticker: BEN

Annual dividend yield: 6.2%

Consecutive quarters without a dividend cut: 112

Source: Goldman Sachs Global Research

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2. Wells Fargo

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (19)

Ticker: WFC

Annual dividend yield: 6.7%

Consecutive quarters without a dividend cut: 39

Source: Goldman Sachs Global Research

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1. CenterPoint Energy

GOLDMAN SACHS: Buy these 15 high-yielding cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments (20)

Ticker: CNP

Annual dividend yield: 7.1%

Consecutive quarters without a dividend cut: 55

Source: Goldman Sachs Global Research