The US stock market is still a volatile place.
Despite a strong rally in July and early August, the benchmark S&P 500 is still down 14% year-to-date.
But you don’t necessarily need a bull market to make money in stocks — you can also collect dividends.
Of course, given the number of dividend stocks on the market, it can be difficult to find a starting point.
Fortunately, a team of Goldman Sachs analysts — led by chief investment officer David Kostin — just put together a list of stocks that could be a bargain for income hunters. These companies offer attractive valuations, high dividend yields and solid growth prospects.
The group notes that dividend stocks are well-positioned for inflationary periods. In July, US consumer prices rose 8.5% from a year ago.
At the same time, Kostin’s team notes that dividend-paying companies often boast strong balance sheets. In the event of an economic downturn, strong balance sheets can help them weather the storm.
Here’s a look at three companies on the list that are particularly generous.
Pioneer Natural Resources (PXD)
Pioneer Natural Resources is an independent oil and gas exploration and production specialist.
Thanks to strong rallies in oil and gas prices this year, the company is firing on all cylinders. Year to date, PXD shares are up 35% — in stark contrast to the broad market’s double-digit loss.
But it’s the sheer size of Pioneer’s shareholder payout that makes it stand out.
The company’s board of directors recently declared a dividend of $8.57 per share for the third quarter. On an annualized basis, this translates to a return of 13.6%
However, note that Pioneer has a base plus variable dividend policy. Its recently reported payout includes a basic quarterly dividend of $1.10 and a variable dividend of $7.47.
In other words, the payments are not set in stone. However, if the energy commodity market remains strong, the company will likely continue to distribute outsized dividends.
Lumen Technologies (LUMN)
Lumen Technologies is a technology and communications company with 450,000 miles of fiber optic route and customers in more than 60 countries. It offers a wide range of network, edge cloud, security, communication and collaboration solutions.
Unlike Pioneer, Lumen stock hasn’t been a hot commodity – shares are down about 14.5% year-to-date. However, the company still deserves investors’ attention.
Paying quarterly dividends of 25 cents per share, Lumen offers an annual dividend yield of 9.2%.
If you’re wondering whether this level of payouts is sustainable, management’s latest outlook may cheer you up.
In its second-quarter earnings call, the company reiterated its full-year outlook, which includes paying a dividend of $1.00 per share for the year — about $1.04 billion in total. Meanwhile, management expects Lumen to generate free cash flow of $2.0 billion to $2.2 billion for the year.
Therefore, if the company achieves its guidance range, it will be able to cover its payout easily in 2022.
Simon Property Group (SPG)
Simon Property belongs to a group called real estate investment trusts — companies that own and manage income-producing properties on behalf of investors.
REITs are especially attractive to income investors because they allow you to collect rent checks without having to own one.
Simon Property owns commercial properties — malls, outlet centers and community/lifestyle centers — throughout North America, Europe and Asia. In US malls and stores, the occupancy rate was 93.9% at the end of June.
The company’s board has already announced two increases in its quarterly dividend this year — first from $1.65 to $1.70 per share and then to $1.75 per share.
At the current share price, the REIT provides an annual dividend yield of 6.5%.
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This article provides information only and should not be construed as advice. Provided without warranty of any kind.