Goldman Sachs says these buy-rated stocks offer solid dividends

CNBC

08-07-2025

Dividend-paying stocks may offer ballast in times of market volatility, even when equities are climbing higher. The S & P 500 was little changed on Tuesday, one day after President Donald Trump rocked the markets with the announcement of steep tariffs against South Korea, Japan and other trading partners starting Aug. 1. Still, the S & P 500 is positive for the year after selling off in April on Trump's first tariffs announcements. Dividend stocks tend to be favored by investors as a way to earn income and hedge some of the volatility. But not all are created equal. Goldman Sachs particularly likes dividend growth stocks, meaning companies that have a history of increasing their payouts. The investment bank recently highlighted some stocks it likes that offer solid dividend yields, strong dividend growth and whose payouts are well covered by earnings. The latter, measured by the "coverage ratio," indicates companies' ability to keep paying their dividends. The stocks are all rated buy at Goldman and have a 2% or higher dividend yield estimated for the fiscal year, which runs from July 2025 to June 2026. They also have at least a 5% compound annual growth rate (CAGR) in dividend-per-share estimated from 2024 through 2026, as well as solid growth in free-cash flow or earnings per share. Each has a dividend coverage ratio of 1x or higher. Here are 10 of the companies that made the Goldman screen. Citigroup , Wells Fargo and Bank of America are among the banks that recently announced plans to raise their dividends after passing the latest Federal Reserve stress tests of their financial health in the event of an economic downturn. Bank of America is raising its quarterly dividend by 8% to 28 cents per share, beginning in the third quarter of 2025. Wells Fargo is boosting its payout by 12.5% to 45 cents per share from 40 cents and Citigroup is increasing its dividend by 4 cents to 60 cents per share. All three names have an estimated dividend-per-share compound annual growth rate from 2024 to 2026 in the double digits. Goldman also sees double-digit returns ahead for the stocks. Two utilities on the bank's buy list are NextEra Energy and American Electric Power . The former has an estimated dividend yield of 3.2% for fiscal year 2025, while the latter has an anticipated yield of 3.6%. NextEra Energy has an estimated dividend-per-share CAGR of 10% between 2024 and 2026, while American Electric Power's is 7%. Shares of NextEra, the largest U.S. renewable power developer, tumbled 3.5% on Tuesday, one day after President Trump signed an executive order ending subsidies for wind and solar energy . The company currently has 119 wind projects in North America. The stock is up less than 1% year to date. American Electric Power, on the other hand, has gained 12% so far this year. It has been a disappointing year for Lowe's investors. The home improvement retailer is down about 9% year to date, but stood by its full-year forecast when it reported quarterly results in late May, saying it can navigate near-term uncertainty and housing-market headwinds. Lowe's has an estimated yield of 2.2% for fiscal year 2025 and an 8% CAGR in dividend per share. Lastly, American Homes 4 Rent has an estimated 3.3% dividend yield for fiscal year 2025. The real estate investment trust focuses on single-family rentals and owns more than 60,000 properties in 24 states. In May, American Homes 4 Rent reiterated its full-year financial guidance , including core funds from operations, coming in between $1.80 to $1.86 per share. The stock has lost 5% year to date.