Goldman Sachs says dividend stocks may be back in the spotlight, but investors should make sure they’re buying high-quality companies with growing dividends. Dividend-paying stocks are expected to rise as the Federal Reserve cuts interest rates. That’s because income investors are likely to turn to them when their yields start to look relatively more attractive than Treasury yields. The central bank lowered the federal funds rate by half a percentage point in September and said it would cut rates by another 50 basis points by the end of 2024. Earnings or free cash flow to cover. All of these companies must also be rated Buy by Goldman Sachs and have a projected 2025 dividend yield of 2% or higher. Estimated free cash flow/EPS from 2026 to 2026. rates the company, and all other industries, at 1.0x or more times estimated free cash flow. Here are some of the stocks Goldman Sachs downgraded. Best Buy currently yields 3.84% and is expected to grow its dividend per share at a CAGR of up to 20% based on forecasts from 2024 to 2026. Analyst Deep Mehta said the estimated dividend yield in 2025 is 4.6%. The retailer is trying to turn things around after seeing sales decline over the past few years. In August, second-quarter profit and revenue beat analysts’ expectations, and Best Buy raised its full-year profit guidance. Best Buy CEO Corey Barry also said on the earnings call that demand spurred by artificial intelligence applications should help boost sales. “We believe that artificial intelligence’s impact on technological innovation and customer needs has just begun,” she said. Best Buy’s shares are up nearly 26% so far this year. Citigroup is one of the bank stocks on the list, with a current dividend yield of 3.58%. The bank’s dividend per share is expected to grow at a compound annual rate of 19% between 2024 and 2026, Mehta said. Citigroup expects a dividend yield of 4.2% in 2025, he added. Citigroup’s shares are up 23% so far this year. Meanwhile, two real estate investment trusts are also on Goldman’s dividend-oriented buy list. American Homes 4 Rent owns single-family homes with a current yield of 2.75%. The compound annual growth rate of dividends per share is expected to be 19% from 2024 to 2026, and the estimated dividend yield in 2025 is 2.9%. Prologis owns warehouses and other industrial properties and currently pays a 3.2% dividend yield. In 2025, its dividend is expected to reach 3.3%. Based on forecasts from 2024 to 2026, the REIT’s dividends per share will grow at a CAGR of 8%. Real estate is the worst-performing sector in the S&P 500, up just over 8% year to date. Shares of American 4 Homes are up nearly 4% so far in 2024, while Prologis is down 10%. In oil, integrated producer Chevron expects a dividend yield of 4.9% next year. The stock currently yields 4.31% and is expected to grow dividends per share at a CAGR of 5% from 2024 to 2026. Shale assets. Chevron is also trying to merge with Hess. Last week, the Federal Trade Commission barred Hess Chief Executive John Hess from Chevron’s board as a condition of the $53 billion merger. A dispute with ExxonMobil over Hess’s oil assets in Guyana remains the final obstacle to completion of the deal. Chevron shares have fallen slightly this year.
