Elevated inflation, rising interest rates, and fears over a recession are impacting stocks. David Kostin’s team noted that dividend stocks typically outperform in an inflationary environment. Below is a list of high dividend-paying stocks that could be a safe haven for the next year. The tumultuous economic environment of 2022 has placed equities at the center of a tug of war.
Elevated inflation can drive some stocks up, while the resulting rising interest rates can drive others down. Meanwhile, fears of a recession are looming over companies and investors, creating further uncertainty.
Some companies are beginning to see consumer sentiment wane, signaling that demand may soon follow, according to a Goldman Sachs note from mid-August.
However, the economy is still showing signs of strength. At the beginning of this past week 91% of the companies in the S&P 500 had reported their second-quarter earnings — and of those companies that had reported, 75% announced earnings that exceeded expectations, according to a report from Oppenheimer.
While these results were promising, future results are far from certain. Companies aren’t expecting economic tensions to ease up until 2023, according to another Goldman report from earlier this month, and many management teams expressed uncertainty about future earnings during their second quarter calls. The sentiment has been echoed by investors across the market, as defensive stocks such as consumer staples have outperformed cyclicals year-to-date.
As the market continues to waver between bullish and bearish, a team of analysts at Goldman Sachs led by Chief Investment Officer David Kostin put together a list of stocks that are trading at large valuation discounts relative to the market. The team at Goldman believes that these stocks could be a safe haven thanks to their dividend yields and higher-than usual growth prospects.
Kostin’s team highlighted the attractiveness of dividend stocks in today’s market because they typically outperform in an inflationary environment and tend to have stronger corporate balance sheets, which create a buffer to protect against an economic downturn.
Analysts at the firm compiled a list of 50 stocks with higher yields, faster growth, and lower P/E ratios than the median stock on the S&P 500. Below is a list of the 23 stocks within that group that have more than double the median 1.8% estimated dividend growth rate for 2023 at a threshold of 4.0%.
Along with each stock is the company’s ticker symbol, its next twelve months’ P/E ratio (NTM P/E), its payout ratio, the stock’s 2022 estimated dividend yield, its 2021 through 2023 compound annual growth rate (CAGR), and its 2023 estimated dividend per share-to-current price (DPS/current price).