Bank of America says the U.S. economy is showing signs of favoring dividend stocks. The firm’s U.S. Institutional Gauge, an economic gauge, posted its largest increase since July 2021 in March after entering a recovery phase in February, equity and quant strategist Savita Subramanian wrote in a note on Wednesday. . In this environment, investors want to own dividend stocks with above-market yields, she said. “High dividend yields have led the way 88% of the time in previous recoveries. This factor has remained cheap and overlooked…If the Fed starts cutting rates, it could be a benefit to income investor flows Or,” Subramanian said. When choosing company names, look for companies that pay above-market yields that are safe rather than exorbitant, Subramanian wrote in her note. On these characteristics, she hopes to turn one-fifth of the Russell 1000 index into two by tracking dividend yields. This includes the second-highest dividend yield segment of the index. Her screen is to prevent owning distressed companies that might end up in the first quintile, the group with the highest dividend yields, if share prices fall ahead of potential dividend cuts. Here are some of the names on Bank of America’s April list. AES and Sempra are the two utilities on the list, with yields of 4% and 3.4% respectively. Generally speaking, utility companies are known for their predictable dividends. While they have lagged the overall market this year, they have seen some growth in recent months. The Utilities Select Sector SPDR Fund (XLU) is up 5% year to date and 4.9% last month. In late February, Sempra CEO Jeffrey Martin told CNBC’s Jim Cramer that the company was increasing its capital plan to $48 billion to fund initiatives such as grid modernization. “The record $48 billion capital program does set out a roadmap for our future growth and should support rate-based growth for our utilities in the range of 9% to 10%,” he said on “Mad Money.” .” So far this year, Sempra’s shares have fallen about 4%, while AES’s shares have fallen nearly 10%. A number of energy companies are also on the list, including APA and HF Sinclair. APA’s dividend yield is 3.1%, while HF Sinclair’s dividend yield is 3.5%. In January, APA announced it would acquire Callon Petroleum in a $4.5 billion all-stock deal. APA CEO John Christmann told CNBC in February that the deal strengthened APA’s “backbone” in the U.S. Permian Basin. APA shares have fallen nearly 10% so far this year, while HF Sinclair shares have gained about 3% over the same period. Finally, Citigroup is one of the financial institutions that Bank of America focuses on. Citi earlier this month reported first-quarter revenue that beat expectations, in part due to better-than-expected performance at its investment banking and trading units. The company’s shares are up 22% so far this year.
