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Uncovering Income — Dividend Stocks in the Time of Coronavirus

As companies conserve cash during the COVID-19 crisis, what stocks offer both high dividend yields and stable distributions?
Visual Capitalist creates and curates enriched visual content focused on emerging trends in business and investing. Founded in 2011 in Vancouver, the team at Visual Capitalist believes that art, data, and storytelling can be combined in a manner that makes complex issues and processes more digestible. Covering high-growth opportunities and industries such as technology, mining, and energy, Visual Capitalist reaches millions of investors each year. Visual Capitalist’s infographics have been featured in The Wall Street Journal, The New York Times, Zero Hedge, Maclean’s, Gizmodo, The Vancouver Sun, and Business Insider.
Visual Capitalist creates and curates enriched visual content focused on emerging trends in business and investing. Founded in 2011 in Vancouver, the team at Visual Capitalist believes that art, data, and storytelling can be combined in a manner that makes complex issues and processes more digestible. Covering high-growth opportunities and industries such as technology, mining, and energy, Visual Capitalist reaches millions of investors each year. Visual Capitalist’s infographics have been featured in The Wall Street Journal, The New York Times, Zero Hedge, Maclean’s, Gizmodo, The Vancouver Sun, and Business Insider.

By Jenna Ross

Uncovering Income: Dividend Stocks with Strong Yields

Amid the current market volatility, attractive income-generating investments can be hard to find.

Treasury bond yields hover near record lows, and U.S. companies face restrictions on issuing dividends if they accept COVID-19 stimulus funds. Moreover, Goldman Sachs estimates dividends for S&P 500 stocks will decline by 25% this year.

Which stocks can investors turn to for stable distributions and relatively high dividend yields? Today’s visualization shows 35 stocks that may meet this criteria, leveraging Goldman Sachs data as published by Forbes.

The Dividend Stocks to Watch

To compile the list, Goldman Sachs identified stocks from the Russell 1000 index that met a number of requirements:

  • A minimum annualized dividend yield of 3%
  • An S&P credit rating of at least BBB+
  • Ample cash on hand
  • Strong balance sheets
  • ”Reasonable” payout ratios
  • At least average performance since the market peak

Dividend yields, which measure dividend income in relation to the share price, were initially calculated March 27. We have updated them as of market close on April 8. Here’s the full breakdown, sorted from highest to lowest dividend yield:

Note: From the original list, 5 stocks have been excluded as they no longer meet the 3% annualized yield threshold.

Centerpoint Energy, an electric and natural gas utility company, is at the top of the list. Since utility stocks are generally considered to be recession-resistant, investors may benefit from both the company’s yield and its defensive qualities.

Financials are the most-represented sector, with 11 companies on the list. Although regulators have pressured European banks to suspend dividend payments, U.S. banks will likely be able to continue their distributions. Top banking executives have argued they have sufficient capital to weather the COVID-19 crisis, and that halting payments would be “destabilizing to investors.”

There are also a number of well-known names on the list, including Home Depot, IBM, and 3M. The latter is the largest maker of respirator masks worldwide, and has been providing critical supplies to the U.S., Canada, and Latin America.

Caution: Volatility Ahead

As the pandemic’s financial impact continues, it’s likely many companies will delay or suspend their dividends. To avoid falling into “yield traps”—a trap in which an attractive yield could be due to a fundamental business problem—investors can screen for the qualities laid out above.

A strong balance sheet, good credit rating, and average or better performance since the downturn can all help point towards stability.

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Equities Contributor: Visual Capitalist

Source: Equities News

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