Goldman Sachs says buy these high dividend growth and yield names to fight inflation

Published Mon, May 2 202211:02 AM EDTUpdated Mon, May 2 202211:02 AM EDT

As companies try to return cash to shareholders through dividends and share buybacks amid rising rates and surging inflation, Goldman Sachs highlighted several names that offer good opportunities for investors that having a hard time riding out this year's volatility. "Stocks returning cash to shareholders typically outperform as economic growth decelerates," Goldman Sachs chief U.S. equity strategist David Kostin said in a note Monday. "Our economists expect the Fed will raise interest rates to engineer a slowdown in economic activity," he added. "When growth slows, a sector-neutral portfolio of stocks spending the most on buybacks and dividends as a share of market cap typically outperforms stocks spending on capex and R & D." The firm recently raised its 2022 dividend growth forecast to 10%, Kostin noted, driven by earnings growth. The firm pointed to several stocks with above-average dividend yields — which show how much a company pays out in dividends each year — and high projected dividend growth, which shows how much that dividend grows over a period of time. Each stock also has a moderate payout ratio, which shows how much of a company's earnings are paid out as dividends. Here are 10 stocks from Goldman's list: Ford has the highest projected dividend growth of all the names at 100%, with a dividend yield of 2.7% and a payout ratio of 19%. The stock is down about 32% for the year. Huntington Bancshares has the highest dividend yield among financials on the list at 4.7%, with projected dividend growth of 7%, Goldman said. Devon Energy , which is up 31% for the year, has a dividend yield of 3.6% and projected dividend growth of 54%. Energy stocks broadly have been outperformers this year as oil prices have surged. Verizon , IBM , Conagra Brands , Gilead Sciences , UPS , Packaging Corp of America and Simon Property Group are also on the list. Kostin added that the firm expects buybacks within the S & P 500 to grow 12% in 2022 and remain the biggest source of demand for stocks, supported by solid earnings growth and large cash balances. He highlighted Meta Platforms , Northrop Grumman , MGM Resorts and APA Corp among the names in the firm's buybacks basket.

Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City.

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