BofA screens for dividends that are secure, not stretched (NYSEARCA:IWB)

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Wall Street is moving to a total return world and dividend contributions to that return will be more important than in the days of lofty price gains, BofA Securities says.

“We advise investors to identify companies with above-market and secure – not stretched – dividend yield,” strategist Savita Subramanian and team wrote in a note.

“We advise investors to identify companies with above-market and secure – not stretched – dividend yield,” Subramanian said. “Quintile 2 of the Russell 1000 by trailing dividend yield may be a good first pass: it includes the second highest tranche of dividend yielders in the index.”

“It has guarded against owning distressed companies that migrate into Quintile 1 (the highest dividend yield group) as prices fall ahead of a dividend cut. Quintile 2 also incorporates a valuation discipline in that if prices rise far faster than dividends grow, companies will migrate into Quintile 3.”

In August, the BofA Quintile 2 screen outperformed the benchmark equal-weight Russell 1000 (EQAL) on a total return basis, -2.4% vs. -3.1%.

Here are the first half of the Quintile 2 stocks for September:

  • Entergy (ETR), dividend yield 3.45%
  • Southern Co. (SO), 3.45%
  • Jefferies Financial (JEF), 3.43%
  • Travel + Leisure (TNL), 3.42%
  • Principal Financial (PFG), 3.41%
  • Webster Financial (WBS), 3.40%
  • Comerica (CMA), 3.39%
  • Carter’s (CRI), 3.39%
  • Crown Castle (CCI), 3.36%
  • Equity Residential (EQR), 3.35%
  • DTE Energy (DTE), 3.35%
  • Valero Energy (VLO), 3.35%
  • Synovus Financials (SNV), 3.34%
  • State Street (STT), 3.34%
  • Cisco Systems (CSCO), 3.33%
  • PNC Financial (PNC), 3.32%
  • Ally Financial (ALLY), 3.31%
  • UDR (UDR), 3.31%
  • Carlyle Group (CG), 3.30%
  • Reynolds Consumer (REYN), 3.29%
  • Evergy (EVRG), 3.29%
  • Morgan Stanley (MS), 3.29%
  • Exelon (EXC), 3.28%
  • Bank of New York Mellon (BK), 3.27%
  • NRG Energy (NRG), 3.27%
  • Eastman Chemical (EMN), 3.26%
  • Public Service (PEG), 3.26%
  • Ardagh Metal Packaging (AMBP), 3.25%
  • Apollo Global (APO), 3.24%
  • Essex Property (ESS), 3.24%
  • Clorox (160), 3.23%
  • Axis Capital (AXS), 3.2%
  • Con Ed (ED), 3.2%
  • Kellogg (K), 3.19%
  • Merck (MRK), 3.19%
  • Welltower (WELL), 3.18%
  • Dominion Energy (D), 3.17%
  • One Group (UNM), 3.17%
  • AvalonBay Communities (AVB), 3.17%

kanawatvector Wall Street is moving to a total return world and dividend contributions to that return will be more important than in the days of lofty price gains, BofA Securities says. “We advise investors to identify companies with above-market and secure – not stretched – dividend yield,” strategist Savita Subramanian and team wrote in a…

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