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GOLDMAN SACHS: Buy these 13 stocks primed to keep delivering powerful dividends as their peers are forced to slash payouts

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  • Dozens of companies have suspended their dividend payments in response to how the coronavirus pandemic is affecting on their businesses, creating a new set of challenges for investors.
  • Goldman Sachs says it's identified some of the companies with a blend of relatively large dividend payments that are also safe and relatively unlikely to get cut or suspended.
  • Each of these listed companies has a dividend rate that's double what the typical Russell 1000 stock pays.
  • Visit Business Insider's homepage for more stories.

Investing can still pay off, but it doesn't pay like it used to.

With the US economy at a near-standstill, corporate America faces an uncertain future and balance sheets are under unprecedented strain. One result is that companies are slashing their payouts. Dozens of S&P 500 companies have already suspended their dividend payments and cut their stock buybacks.

In total, Goldman Sachs says spending on buybacks will be cut in half and dividend spending will drop 23% in 2020, to its lowest level in at least five years. The firm sees little prospect of improvement in 2021.

But that general rule doesn't dictate what every single company will do. David Kostin — Goldman's chief US equity strategist — says investors who want dividend income should look at three criteria: high yields, safe balance sheets, and reasonable payout ratios.

The appeal of the first group is obvious, as safe balance sheets and sustainable payout ratios mean there's less chance the company will have to cut its dividend payments because it's in dire financial straits.

Kostin and his team scanned through components of the Russell 1000 index to find companies that satisfy all of those requirements. Their payments are far stronger than the typical stock, as they all have annual yields of least 4.5% — nearly triple the Russell 1000 median of 1.7%.

The evidence for their strong balance sheets comes in the form of their S&P long-term issuer ratings, which are all BBB+ or higher. That's a comfortably investment-level grade.

The payout ratios are also reasonable, leaving less risk the company will have to cut its payments to meet other obligations. In 2019 most of these companies' dividends were equal to about 50% of their annual earnings. That number is likely to shoot higher this year as earnings drop, but the 2019 figures are evidence of safety.

These are Kostin's top 13 stocks that fit all three categories. They're ranked from lowest to highest based on the size of their annual dividend yields. At a time stock picking more important than it's been in years, that knowledge might pay off in a big way. 

SEE ALSO: The manager of the best small-cap fund of the past 20 years explains why he's betting big on a consumer recovery — and shares his top 4 stock picks in the struggling sector

13. NetApp

Ticker: NTAP

Sector: Information technology

S&P Long-term issuer rating: BBB+

Annual dividend yield: 4.5%



12. Eaton Vance

Ticker: EV

Sector: Financials

S&P Long-term issuer rating: A-

Annual dividend yield: 4.5%



11. Raytheon

Ticker: RTN

Sector: Industrials

S&P Long-term issuer rating: BBB+

Annual dividend yield: 4.6%



10. PNC Financial Services Group

Ticker: PNC

Sector: Financials

S&P Long-term issuer rating: A-

Annual dividend yield: 4.6%



9. US Bancorp

Ticker: USB

Sector: Financials

S&P Long-term issuer rating: A+

Annual dividend yield: 4.9%



8. Omnicom

Ticker: OMC

Sector: Communication services

S&P Long-term issuer rating: BBB+

Annual dividend yield: 5.0%



7. Truist Financial

Ticker: TFC

Sector: Financials

S&P Long-term issuer rating: A-

Dividend yield: 5.1%



6. IBM

Ticker: IBM

Sector: Information technology

S&P Long-term issuer rating: A

Annual dividend yield: 5.2%



5. People's United Financial

Ticker: PBCT

Sector: Financials

S&P Long-term issuer rating: BBB+

Annual dividend yield: 6.0%



4. Regency Centers

Ticker: REG

Sector: Real estate

S&P Long-term issuer rating: A+

Annual dividend yield: 6.8%



3. Franklin Resources

Ticker: BEN

Sector: Financials

S&P Long-term issuer rating: A+

Annual dividend yield: 6.8%



2. CenterPoint Energy

Ticker: CNP

Sector: Utilities

S&P Long-term issuer rating: BBB+

Annual dividend yield: 7.0%



1. Wells Fargo

Ticker: WFC

Sector: Financials

S&P Long-term issuer rating: A-

Annual dividend yield: 7.6%





* This article was originally published here Press Release Distribution

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