The US stock market continues to be a volatile place.
Despite a strong comeback in July and early August, the benchmark S&P 500 Index is still down 15% year to date.
But you don’t necessarily need a rally market to make money in stocks — you can also collect dividends.
A team of analysts at Goldman Sachs, led by Chief Investment Officer David Kostin, has just compiled a list of stocks that could be an opportunity for income hunters. These companies offer attractive valuations, high dividend yields and solid growth prospects.
The team points out that dividend stocks are well positioned for inflationary periods. In July, US consumer prices rose 8.5% from a year earlier.
At the same time, Costin’s team notes that dividend-paying companies often boast strong balance sheets. In the event of an economic downturn, strong balance sheets can help them weather the storm.
Here’s a look at three companies on the list.
Do not miss
Pioneer Natural Resources (PXD)
Pioneer Natural Resources is an independent oil and gas exploration and production specialist.
Thanks to a sharp rise in oil and gas prices this year, the company is firing on all cylinders. Year-to-date, PXD shares are up 35% — in stark contrast to the broad market’s double-digit loss.
But the sheer size of Pioneer’s shareholder payout makes it stand out.
The company’s board recently declared a cash dividend of $8.57 per share for the third quarter. On an annualized basis, this means a return of 13.3%
Note, however, that Pioneer has a base plus variable dividend policy. Its newly declared payout includes a $1.10 basic quarterly dividend and a $7.47 variable dividend.
In other words, payouts aren’t set in stone. But if the energy commodity market remains strong, the company is likely to continue to distribute huge dividends.
Lumen Technologies (LUMN)
Lumen Technologies is a technology and communications company with 450,000 route miles of fiber and customers in more than 60 countries. It offers a wide range of networking, edge cloud, security, communication and collaboration solutions.
Unlike Pioneer, Lumen’s stock isn’t a hot commodity — shares are down about 15% year-to-date. But the company still deserves the attention of dividend investors.
Paying quarterly dividends of 25 cents per share, Lumen offers an annual dividend yield of 9.3%.
If you’re wondering whether this payout level is sustainable, management’s latest outlook may cheer you up.
In its second-quarter earnings call, the company reiterated its full-year outlook, which includes a dividend payout of $1.00 per share for the year — a total of roughly $1.04 billion. Meanwhile, management expects Lumen to generate free cash flow of $2.0 billion to $2.2 billion for the year.
Therefore, if the company achieves its guidance range, it will be able to cover its payout easily in 2022.
Simon Property Group (SPG)
Simon Property belongs to a group called real estate investment trusts – companies that own and manage lucrative properties on behalf of investors.
REITs are particularly attractive to income investors because they allow you to collect rent checks without having to be a landlord.
Simon Property owns commercial real estate – shopping centers, outlet centers and community/lifestyle centers – in North America, Europe and Asia. In US malls and outlets, the occupancy rate was 93.9% at the end of June.
The company’s board of directors has already announced two quarterly dividend increases this year — first from $1.65 to $1.70 per share, then to $1.75 per share.
At the current share price, the REIT provides an annual dividend yield of 6.7%.
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This article provides information only and should not be construed as advice. Provided without any warranty.