Dividends may be harder to find these days, and that means investors should be discerning as they hunt for an income strategy, according to Berenberg. In fact, as the economy slows, investors can turn to dividend stocks to play defense. Berenberg economists are forecasting U.S. gross domestic product growth to slow from 2.1% in 2023 to 1.2% in 2024, strategist Jonathan Stubbs said in a note last week. Meanwhile, global dividends are expected to total just over $2 billion in 2023 , flat compared with last year, according to an August report from S & P Global Market Intelligence. It is the lowest rate of growth in the last decade except for the pandemic contraction in 2020, the report said. “We continue to highlight the importance of income strategies in a post-COVID-19 world; in our view, this approach is even more relevant in an era of higher inflation as investors seek to deliver real (as well as benchmark-beating) returns,” Stubbs wrote. To find dividend-yielding stocks with quality fundamentals, Berenberg screened for stocks with the following criteria: 12-month forward dividend yield of greater than 3% Strong balance sheet, with a 12-month forward net debt-to-earnings before interest, taxes, depreciation and amortization ratio less than 1.5 (less than 3 is considered acceptable) Surplus free cash flow, based on the difference between 12-month forward free-cash-flow and dividend yields and greater than 2% Here are 10 stocks that made the cut. The majority of the names on the list are in the energy sector. The largest company, Exxon Mobil , has a 12-month forward dividend yield of 3.3% and a surplus free-cash-flow yield of 4%, Stubbs said. The oil giant reported a second-quarter earnings miss in July, but its revenue beat expectations. Following the earnings report, CEO Darren Woods told CNBC’s “Squawk Box” said he feels good about the value Exxon Mobil is delivering in this “more normal” market. “We are back in a better place and demand looks pretty robust,” he said. Pfizer is one of two health-care companies that made the cut. It has a 4.7% 12-month forward dividend yield and a surplus free-cash-flow yield of 2.2%. The drugmaker’s updated Covid vaccine was approved by the Food and Drug Administration on Monday. It is also developing a weight-loss drug to compete with the blockbuster medications from Novo Nordisk and Eli Lilly. The only automobile name on the list is Ford Motor . It has a 12-month forward dividend yield of 5.8% and a 5% surplus free-cash-flow yield, according to Berenberg. Ford posted a significant second-quarter earnings beat in July and raised its 2023 guidance. In May, the automaker announced it was teaming up with Tesla on charging initiatives for its electric vehicles, which would get access to Tesla Superchargers in the U.S. and Canada. — CNBC’s Michael Bloom contributed reporting.
Investors can find income in these quality stocks, Berenberg says
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