Tags: Goldman | Sachs | income | stocks

Goldman Sachs’ Favorite ‘Income’ Stocks

Wednesday, 10 Oct 2012 09:56 AM

By Dan Weil

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Goldman Sachs analysts put together a list of their favorite “income” stocks — those that provide generous dividends and share buybacks.

The report, obtained by Business Insider, names 27 companies including:

Company Dividend Yield EPS Accretion from Buybacks
 TE Connectivity 2.3 percent 2.7 percent
 Cummins 1.87 percent 3 percent
 Invesco 2.3 percent 2.6 percent
 Corning 2.3 percent 3.2 percent
 St. Jude Medical 2.1 percent 3.5 percent
 JPMorgan Chase 2.8 percent 2.7 percent
 Baxter Intl 2.4 percent 3.5 percent
 Republic Svcs 3.2 percent 2.9 percent
 J.M. Smucker 2.3 percent 3.9 percent
 Campbell Soup 3.3 percent 3.3 percent

Many experts say technology stocks, such as Microsoft, Cisco,and Intel, now represent attractive dividend plays. But others say the juicy dividends these stocks now offer simply reflect the companies’ diminished earnings prospects.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

“The signal they are sending to the shareholders is, ‘look, growth prospects just aren’t there,’” Malcolm Polley, chief investment officer at Stewart Capital, tells Bloomberg.

“Those companies that are paying dividends and increasing dividends, they used to be businesses that were fast growing, they needed every dime of cash flow to reinvest in the business. But these are by and large very mature businesses now.”

The Dow Jones Select Dividend Index has outperformed the Dow Jones Stock Market Index by 3.6 percentage points annually during the past three years.

In light of that, many experts argue that dividend stocks are overvalued. But some solid investment opportunities still exist among them, especially ones with a foreign presence, according to The Wall Street Journal.

The paper recommends large companies with solid balance sheets. It favors defensive industries, such as services and consumer staples.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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