BMO: These 42 dividend stocks will provide strong income growth as inflation continues to run hotter than expected

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Investors can target stocks with strong dividends to ride out high market volatility. Alistair Berg/Getty Images This story is available exclusively to Insider subscribers. Become an Insider and start reading now. Higher-than-expected inflation has caused many Wall Street strategists to recalculate. Brian Belski, the top strategist at BMO Capital Markets, just cut his S&P 500 price target. Here are 42 stocks to consider for strong dividend growth as prices continue to surge. The biggest surprise in markets this year is just how persistent inflation has been. Central banks like the Federal Reserve were certainly caught flatfooted, as were Wall Street strategists — especially bullish ones like Brian Belski, the chief investment strategist at BMO Capital Markets.

For most of this year, Belski had the highest S&P 500 price target on the Street. But Belski no longer holds the title of biggest bull after he cut his target for the second time this year on Thursday. The revision came after September’s inflation report came in hotter than expected.

“What has changed? The simple answer is the inflation environment, which we underestimated with our previous forecast,” Belski wrote in an October 13 note announcing the new price target.

Although Belski expects inflation reports to remain hot, he’s still bullish. His revised S&P 500 target implies that the index will rise by a “more realistic” 19% in the fourth quarter to finish the year at 4,300. That would make a 10% loss after the index was down nearly 27%.

“Although we have tempered our enthusiasm, we truly believe that stocks can and should rebound from current levels,” Belski wrote. “The one caveat is that future trajectory is likely to follow more normalized patterns, a sharp departure from the pandemic stimulus-fueled gains of 2020-21 and the resulting YTD losses that unwound much of that excess.”

Focus on 42 stocks with solid dividend growth as inflation runs rampantBelski and his colleagues at BMO Capital Markets have nine investing strategy portfolios that can serve as models for investors. One such portfolio is the US dividend growth portfolio, which was down 5.5% in the third quarter and lagged the S&P 500 by 0.65% in that span but is still outperforming the index by 6% on the year, according to the firm. The portfolio yields 3.4%.

Below are the 42 stocks that are currently in the US dividend growth portfolio along with the ticker, sector, dividend yield as of October 10, and rating from BMO analysts for each.

1. Comcast Corporation Class A

Markets Insider Ticker: CMCSA

Sector: Communication Services

Yield: 3.5%

Rating: Not rated

2. Verizon Communications Inc.

Markets Insider Ticker: VZ

Sector: Communication Services

Yield: 6.7%

Rating: Not rated

3. Lowe’s Companies, Inc.

Markets Insider Ticker: LOW

Sector: Consumer Discretionary

Yield: 1.8%

Rating: Not rated

4. McDonald’s Corporation

Markets Insider Ticker: MCD

Sector: Consumer Discretionary

Yield: 2.4%

Rating: Outperform

5. Target Corporation

Markets Insider Ticker: TGT

Sector: Consumer Discretionary

Yield: 2.4%

Rating: Outperform

6. Altria Group Inc.

Markets Insider Ticker: MO

Sector: Consumer Staples

Yield: 8.9%

Rating: Not rated

7. PepsiCo, Inc.

Markets Insider Ticker: PEP

Sector: Consumer Staples

Yield: 2.7%

Rating: Not rated

8. Procter & Gamble Company

Markets Insider Ticker: PG

Sector: Consumer Staples

Yield: 2.8%

Rating: Not rated

9. Chevron Corporation

Markets Insider Ticker: CVX

Sector: Energy

Yield: 3.8%

Rating: Outperform

10. Ameriprise Financial, Inc.

Markets Insider Ticker: AMP

Sector: Financials

Yield: 1.8%

Rating: Not rated

11. Bank of America Corp

Markets Insider Ticker: BAC

Sector: Financials

Yield: 2.8%

Rating: Market perform

12. BlackRock, Inc.

Markets Insider Ticker: BLK

Sector: Financials

Yield: 3.3%

Rating: Market perform

13. Goldman Sachs Group, Inc.

Markets Insider Ticker: GS

Sector: Financials

Yield: 2.7%

Rating: Outperform

14. JPMorgan Chase & Co.

Markets Insider Ticker: JPM

Sector: Financials

Yield: 3.8%

Rating: Market perform

15. MetLife, Inc.

Markets Insider Ticker: MET

Sector: Financials

Yield: 3.2%

Rating: Not rated

16. Morgan Stanley

Markets Insider Ticker: MS

Sector: Financials

Yield: 3.6%

Rating: Outperform

17. Prudential Financial, Inc.

Markets Insider Ticker: PRU

Sector: Financials

Yield: 5.5%

Rating: Not rated

18. Regions Financial Corporation

Markets Insider Ticker: RF

Sector: Financials

Yield: 3.4%

Rating: Not rated

19. U.S. Bancorp

Markets Insider Ticker: USB

Sector: Financials

Yield: 4.6%

Rating: Not rated

20. Amgen Inc.

Markets Insider Ticker: AMGN

Sector: Healthcare

Yield: 3.3%

Rating: Market perform

21. Gilead Sciences, Inc.

Markets Insider Ticker: GILD

Sector: Healthcare

Yield: 4.7%

Rating: Market perform

22. Johnson & Johnson

Markets Insider Ticker: JNJ

Sector: Healthcare

Yield: 2.6%

Rating: Not rated

23. Medtronic Plc

Markets Insider Ticker: MDT

Sector: Healthcare

Yield: 3.2%

Rating: Not rated

24. Merck & Co., Inc.

Markets Insider Ticker: MRK

Sector: Healthcare

Yield: 3.2%

Rating: Market perform

25. Pfizer Inc.

Markets Insider Ticker: PFE

Sector: Healthcare

Yield: 3.6%

Rating: Outperform

26. UnitedHealth Group Incorporated

Markets Insider Ticker: UNH

Sector: Healthcare

Yield: 1.2%

Rating: Not rated

27. Honeywell International Inc.

Markets Insider Ticker: HON

Sector: Industrials

Yield: 2.3%

Rating: Not rated

28. Lockheed Martin Corporation

Markets Insider Ticker: LMT

Sector: Industrials

Yield: 2.8%

Rating: Not rated

29. Northrop Grumman Corp.

Markets Insider Ticker: NOC

Sector: Industrials

Yield: 1.4%

Rating: Not rated

30. Waste Management, Inc.

Markets Insider Ticker: WM

Sector: Industrials

Yield: 1.5%

Rating: Market perform

31. Apple Inc.

Markets Insider Ticker: AAPL