Dividend-paying stocks may be nearing a tailwind — and investors would do well to pull names that offer solid income, according to Bank of America. “We believe we are now in a world of absolute returns where the contribution of deficits to market returns is likely to be much higher than it was a decade ago,” wrote the team led by by equity expert and quant strategist Savita Subramanian on July 16. report. Dividend payers have underperformed the overall market in 2024, largely left in the dust as investors chase artificial intelligence heirs. The Schwab US Dividend Equity ETF (SCHD) has a total return of nearly 8% this year, compared to nearly 15% for the S&P 500. But these stocks may be on the verge of of the emergence of the Federal Reserve starting to lower interest rates. This can make dividend-paying stocks more attractive to cash-strapped investors than risk-free Treasurys. Investors will have to choose about their dividends. High dividend yields may look attractive on paper, but they can be a sign that the stock is going down. Additionally, high dividend payout ratios may mean that the company is paying more dividends to shareholders in the form of dividends – a move that may not be sustainable if the company becomes and financial pressure. “We advise investors to look for companies with safe (unstretched) profit margins,” said the Bank of America team. Strategists at the firm analyzed the Russell 1000, divided it into quintiles and highlighted the second-highest dividend-paying names in the index. “It has guarded against having distressed companies move to Quintile 1 (the highest profit group) if prices fall before a possible reduction,” the group wrote. Here are a few names that made the grade. Bank of America called Coterra Energy. The stock is up only about 2% through 2024, but has a dividend yield of 3.1%. The oil and natural gas producer is scheduled to report its quarterly results in Aug. 1. Bank of America analyst Kalei Akamine indicated a few things that investors should watch when entering earnings, including the production proposal of the first 10 wells of Coterra from the Wyndham Row development. “Coterra has a track record of delivering strong performance sites, making it a long-term investment,” he wrote in a report this week. Akamine reiterated his stock buy points. CTRA YTD mountain Coterra Energy’s YTD performance Utilities giant Southern Co. was on Bank of America’s list of dividend payers as well. Last year, the company completed the first nuclear plant in the US in more than three decades. Earlier this week, Guggenheim analyst Shahriar Pourreza raised his price target on Southern to $87 from $85. His team, which rates the stock, also raised their 2024 to 2028 annual earnings per share estimates. Southern is up nearly 17% through 2024, and the stock has a dividend yield of 3.5%. SO YTD Mountain Southern Company in 2024 Specialty glass maker and artificial intelligence player Corning was also on the Bank of America screen. Earlier this month, Corning said it expects its second-quarter sales to exceed its guidance, with core earnings per share “at the high end or slightly above the guidance range.” ” The company said that this process is not working due to the adoption of optical communication products for AI production. Corning will present its results for the second quarter on July 30. The stock has increased by 42% this year, there is no doubt that it has gained strength from the excitement of AI. It has a dividend yield of 2.6 %. Correction: This story has been updated to correct the percentages in the list.
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