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In this article, we will discuss Goldman Sachs' cheap dividend stocks. You can skip our detailed analysis of dividend investing and the firm's outlook on dividend stocks, and go directly to read Goldman Sachs' 5 Cheap Dividend Stocks.
Growth tech stocks have dominated the market for years due to their innovative products and services. However, since the start of this year, the investing landscape has widely transformed as investors prefer previously overlooked dividend stocks. Analysts recommend dividend stocks because of their ability to generate stable and regular income for shareholders. Some of the best dividend stocks in this regard are AbbVie Inc. (NYSE:ABBV), Chevron Corporation (NYSE:CVX), and Medtronic plc (NYSE:MDT).
Dividend payments have reached their record level this year as more and more companies have raised their payouts steadily. According to a recent report published by S&P Global, dividend payments in the third quarter of 2022 grew by 8.5% from the same period last year. The report also highlighted that the net indicated dividend gain in the 12-month period ending September was $71.5 billion, up from $61.4 billion in the prior-year period. Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, mentioned that investors are moving towards more secure dividend companies due to the continuous market decline. He further mentioned that dividend payments are expected to increase in the fourth quarter and reach a record level.
The ongoing dividend frenzy has brought many strong dividend players into the limelight that analysts are overwhelmingly recommending in this current volatility. Recently, Goldman Sachs analyst David Kostin highlighted the outperformance of dividend stocks in weak economic growth in his interview with Business Insider. He said that companies with strong cash generation are preferred and outperform other asset classes. His firm predicts that dividends per share will grow by 6% in the next decade, compared with a 0.5% growth forecast according to market pricing. According to the firm, dividend growth has never fallen below 2% on a 10-year annualized basis since 1950. Given this, the firm shortlisted some of the best cheap dividend stocks with strong yields.
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Our Methodology:
For this article, we analyzed the best cheap dividend stocks to buy according to Goldman Sachs. We shortlisted these stocks from a recent Business Insider report in which the firm presented a detailed analysis of these stocks in case of a possible recession. The firm has also mentioned the respective companies' dividend growth over the next two years. The stocks are ranked according to their dividend yields, as of November 4.
Goldman Sachs' Cheap Dividend Stocks
15. Broadcom Inc. (NASDAQ:AVGO)
Dividend Yield as of November 4: 3.55%
Broadcom Inc. (NASDAQ:AVGO) is an American manufacturer of semiconductors and a global supplier of related products. In fiscal Q3 2022, the company's cash position remained strong as its operating cash flow stood at $4.4 billion and its free cash flow was recorded at $4.3 billion. The company also paid $1.7 billion worth of dividends to shareholders, which makes it one of the best dividend stocks on our list.
On September 1, Broadcom Inc. (NASDAQ:AVGO) declared a quarterly dividend of $4.10 per share, in line with its previous dividend. The company maintains an 11-year track record of consistent dividend growth. As of November 4, the stock's yield is 3.55%. Goldman Sachs forecasts a 10% dividend growth for the company by 2024.
In October, Deutsche Bank maintained a Buy rating on Broadcom Inc. (NASDAQ:AVGO) with a $575 price target, appreciating the company's strong fundamentals.
At the end of Q2 2022, 66 hedge funds in Insider Monkey’s database owned stakes in Broadcom Inc. (NASDAQ:AVGO), down from 71 in the previous quarter. These stakes hold a total value of over $4 billion. Among these hedge funds, Fisher Asset Management was the company's leading stakeholder in Q2.
In addition to some of the best dividend stocks like AbbVie Inc. (NYSE:ABBV), Chevron Corporation (NYSE:CVX), and Medtronic plc (NYSE:MDT), investors are also paying attention to Broadcom Inc. (NASDAQ:AVGO) because of the company's consistent dividends.
Carillon Tower Advisers mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2022 investor letter. Here is what the firm has to say:
“Tech stocks, including Broadcom Inc. (NASDAQ:AVGO), were one of the hardest-hit sectors due to fears over a weakening macroeconomic environment. Broadcom, however, outperformed semiconductor peers as its end-market exposures provided relatively more defensive characteristics.”
14. Gilead Sciences, Inc. (NASDAQ:GILD)
Dividend Yield as of November 4: 3.62%
Gilead Sciences, Inc. (NASDAQ:GILD) is a California-based biopharmaceutical company that focuses on the research and development of antiviral drugs. The company is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past six years. It currently pays a quarterly dividend of $0.73 per share and has a dividend yield of 3.62%, as of November 4. According to Goldman Sachs, the company's dividend are expected to grow by 5% over the next two years.
During Q3 2022, Gilead Sciences, Inc. (NASDAQ:GILD) reported an operating cash flow of $2.9 billion and its free cash flow came in at over $2.7 billion. The company's cash flow was sufficient to cover its dividend payments worth over $928 million. Moreover, it also repurchased shares worth $180 million.
In October, Maxim raised its price target on Gilead Sciences, Inc. (NASDAQ:GILD) to $92 and maintained a Buy rating on the shares. The firm appreciated the company's recent quarterly earnings and the continued growth of its oncology platform.
According to Insider Monkey’s data for Q2 2022, 58 hedge funds owned stakes in Gilead Sciences, Inc. (NASDAQ:GILD), compared with 68 in the previous quarter. The collective value of stakes owned by these funds is roughly $4 billion. Jim Simons and Ken Griffin were some of the company’s prominent stakeholders in Q2.
13. Conagra Brands, Inc. (NYSE:CAG)
Dividend Yield as of November 4: 3.68%
Conagra Brands, Inc. (NYSE:CAG) is a Chicago-based consumer packaged goods company holding company. In fiscal Q1 2023, the company paid $150 million to shareholders in dividends. The company's cash position was stable during the quarter as its operating cash flow amounted to $263.7 million, up from $140 million during the same period last year.
Conagra Brands, Inc. (NYSE:CAG) holds a 3-year streak of consistent dividend growth, which lists it as one of the best dividend stocks. The company currently pays a quarterly dividend of $0.33 per share for a dividend yield of 3.68%, as of November 4. Goldman Sachs expects the company's dividend to grow by 5% by 2024.
In October, Deutsche Bank raised its price target on Conagra Brands, Inc. (NYSE:CAG) to $33 with a Neutral rating on the shares, appreciating the company's portfolio construction and margin recovery.
At the end of Q2 2022, 30 hedge funds tracked by Insider Monkey owned investments in Conagra Brands, Inc. (NYSE:CAG), up from 22 in the previous quarter. The stakes owned by these hedge funds have a consolidated value of over $603.4 million.
12. The PNC Financial Services Group, Inc. (NYSE:PNC)
Dividend Yield as of November 4: 3.86%
The PNC Financial Services Group, Inc. (NYSE:PNC) is an American financial services corporation and bank holding company. JPMorgan appreciated the company's strong fundamentals and stock performance in the current environment. Given this, the firm held an Overweight rating on the stock in October with a $171.5 price target.
In the third quarter of 2022, The PNC Financial Services Group, Inc. (NYSE:PNC) reported strong results. The company posted an EPS of $3.78 and revenue of $5.55 billion, beating Street estimates by $0.09 and $150 million, respectively. The company also returned $1.7 billion to shareholders during the quarter, including $600 million worth of dividends.
The PNC Financial Services Group, Inc. (NYSE:PNC) currently pays a quarterly dividend of $1.5 per share with a dividend yield of 3.86%, as of November 4. The company has been making regular dividend payments for the past 30 years, which makes it one of the best dividend stocks on our list. Moreover, it has raised its payouts for 12 years in a row. Its dividend growth rate is estimated at 13% over the next two years by Goldman Sachs.
As of the close of Q2 2022, 42 hedge funds tracked by Insider Monkey reported owning stakes in The PNC Financial Services Group, Inc. (NYSE:PNC), compared with 49 in the previous quarter. These stakes have a total value of roughly $593 million. D E Shaw was the company’s leading stakeholder in Q2.
11. Amcor plc (NYSE:AMCR)
Dividend Yield as of November 4: 4.42%
Amcor plc (NYSE:AMCR) is a global packaging company that provides flexible packaging solutions to consumers around the globe. On November 1, the company declared a 2.1% hike in its quarterly dividend to $0.1225 per share. The company has been raising its dividends consistently for the past 39 years, which makes it one of the best dividend stocks on our list. As of November 4, the stock has a dividend yield of 4.42%. According to Goldman Sachs, the company's dividend will grow by 9% by 2024.
In fiscal Q1 2023, Amcor plc (NYSE:AMCR) reported an adjusted free cash flow of $400 million. The company's revenue for the quarter came in at $3.71 billion, which showed an 8.5% growth from the same period last year. It also paid $181 million in dividends to shareholders.
BofA double upgraded Amcor plc (NYSE:AMCR) to Buy in October with a $13 price target. The firm mentioned that the Packaging sector is a cheap group for this market and recommends investors buy these defensive stocks.
At the end of the June quarter, 20 hedge funds tracked by Insider Monkey owned stakes in Amcor plc (NYSE:AMCR), the same as in the previous quarter. The collective value of these stakes is over $252.4 million. Polaris Capital Management was the company’s leading stakeholder in Q2, owning stakes worth roughly $200 million.
10. Ford Motor Company (NYSE:F)
Dividend Yield as of November 4: 4.46%
An American multinational automobile company, Ford Motor Company (NYSE:F) is another best dividend stock to buy on our list. The company pays a quarterly dividend of $0.15 per share for a dividend yield of 4.46%, as of November 4. Goldman Sachs expects the company's dividend to grow by 10% over two years.
Ford Motor Company (NYSE:F) reported its third-quarter earnings recently and showed growth on various fronts. The company generated $3.8 billion in operating cash flow and its adjusted cash flow stood at $3.6 billion. Its revenue also showed a 12% year-over-year growth at $37.2 billion.
Morgan Stanley mentioned automobile companies in its October investors' note and pointed out that these companies are solid cash generators in the current environment. In view of this, the firm held an Overweight rating on the stock with a $14 price target on the shares.
As of the close of Q2 2022, 46 hedge funds in Insider Monkey’s database owned stakes in Ford Motor Company (NYSE:F), the same as in the previous quarter. The collective value of these stakes is over $608.7 million.
Leaven Partners mentioned Ford Motor Company (NYSE:F) in its third-quarter 2022 investor letter. Here’s what the firm said:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
9. Organon & Co. (NYSE:OGN)
Dividend Yield as of November 4: 4.63%
Organon & Co. (NYSE:OGN) is a New Jersey-based pharmaceutical company that sells its medicines to international markets. The company started paying dividends in the second quarter of 2021. Its quarterly dividend currently stands at $0.28 per share for a dividend yield of 4.63%, as of November 4. The company's dividend growth is projected at 3% over the next to years, according to Goldman Sachs.
In Q3 2022, Organon & Co. (NYSE:OGN) reported revenue of $1.54 billion, which beat estimates by $20 million. The company ended the quarter with roughly $500 million in cash and cash equivalents. For FY22, it expects the revenue to fall between $6.1 billion to $6.2 billion.
In September, Piper Sandler upgraded the stock to Overweight with a $34 price target, appreciating the company’s fundamentals and its balance sheet.
As of the close of Q2 2022, 28 hedge funds tracked by Insider Monkey reported owning stakes in Organon & Co. (NYSE:OGN), up from 27 in the previous quarter. The collective value of these stakes is over $232.6 million. AQR Capital Management was the company’s leading stakeholder in Q2.
Miller Value Partners mentioned Organon & Co. (NYSE:OGN) in its recently-published Q3 2022 investor letter. Here is what the firm has to say:
“Organon & Co. (NYSE:OGN) was the top detractor for the quarter, falling 30.0%2. Organon reported 2Q22 revenue of $1.59 billion, -0.6% Y/Y, ahead of consensus of $1.54 billion, and Adjusted EPS of $1.25, -27.3% Y/Y, in-line with analyst expectations. Adjusted EBITDA for the quarter came in at $512 million (32.3% margin), compared to 2Q21 Adjusted EBITDA of $627 million (39.3% margin). Management revised FY22 guidance for revenue of $6.1-6.3 billion, compared to previous guidance for revenue of $6.1-6.4 billion, to reflect persisting foreign exchange (FX) headwinds, and Adjusted EBITDA margin of 32-34%, compared to prior guidance for a margin of 34-36%, which incorporates ~$110 million of in-process research and development (IPR&D) and milestone expenses from business development. Management’s guidance implies FY22 Adjusted EBITDA of $2.05B, at the respective midpoints, or an Enterprise Value (EV)/EBITDA multiple of ~7.0x.”
8. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of November 4: 4.68%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an American investment management company that offers a wide range of related services to its consumers. In Q3 2022, the company reported $1.23 trillion in assets under management and revenue of $1.59 billion. The company returned $500.9 million to shareholders during the quarter, $224.5 million of which represent share repurchases.
On November 1, T. Rowe Price Group, Inc. (NASDAQ:TROW) declared a quarterly dividend of $1.20 per share, in line with its previous dividend. The company is one of the best dividend stocks to buy as it has raised its dividends consistently for the past 36 years. As of November 4, the stock has a dividend yield of 4.68%. The company's dividend is expected to grow by 10% over the next two years, according to Goldman Sachs.
At the end of Q2 2022, 27 hedge funds tracked by Insider Monkey reported owning stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), compared with 33 in the previous quarter. These stakes have a collective value of over $262.1 million.
7. International Business Machines Corporation (NYSE:IBM)
Dividend Yield as of November 4: 4.86%
International Business Machines Corporation (NYSE:IBM) is a New York-based multinational tech company. Morgan Stanley maintained an Overweight rating on the stock in October with a $152 price target, highlighting the company's solid revenue growth over the past years.
Year-to-date, International Business Machines Corporation (NYSE:IBM) reported an operating cash flow of $6.5 billion and its free cash flow came in at $4.1 billion. During the third quarter, the company returned $1.5 billion to shareholders in dividends, which makes it one of the best dividend stocks to buy.
International Business Machines Corporation (NYSE:IBM) currently pays a quarterly dividend of $1.65 per share and has a dividend yield of 4.86%, as of November 4. The company has been a regular dividend payer since 1916 and maintains a 27-year streak of dividend growth. Goldman Sachs expects the company's dividend to grow by 1% by 2024.
As of the close of Q2 2022, 40 hedge funds in Insider Monkey’s database owned stakes in International Business Machines Corporation (NYSE:IBM), down from 43 in the previous quarter. These stakes have a total value of over $948.3 million. Citadel Investment Group owned the largest position in the company in Q2.
6. Viatris Inc. (NASDAQ:VTRS)
Dividend Yield as of November 4: 4.96%
Viatris Inc. (NASDAQ:VTRS), an American pharmaceutical company, started its dividend policy in 2021 and also announced a dividend growth of 9% in January. The company pays a quarterly dividend of $0.12 per share and has a dividend yield of 4.96%, as of November 4. Goldman Sachs expects an 8% dividend growth for the company by 2024. It can be a good addition to dividend portfolios alongside famous dividend stocks like AbbVie Inc. (NYSE:ABBV), Chevron Corporation (NYSE:CVX), and Medtronic plc (NYSE:MDT).
Barclays maintained an Overweight rating on Viatris Inc. (NASDAQ:VTRS) in October with a $16 price target, presenting an overall positive outlook on specialty pharmaceuticals.
As of the end of the June quarter, 50 hedge funds in Insider Monkey’s database owned stakes in Viatris Inc. (NASDAQ:VTRS), compared with 55 a quarter earlier. These stakes have a collective value of over $1.23 billion. Camber Capital Management was the company’s leading stakeholder in Q2.
Miller Value Partners mentioned Viatris Inc. (NASDAQ:VTRS) in its recently-published Q3 2022 investor letter. Here is what the firm has to say:
“Viatris Inc. (NASDAQ:VTRS) fell 17.8%2 during the quarter. Viatris reported 2Q22 revenue of $4.12 billion, -3% Y/Y on an operational basis, below consensus of $4.19 billion, and diluted EPS of $0.26, compared to a net loss per share of -$0.23 in 2Q21, ahead of analyst expectations for EPS of $0.19. The company generated 2Q22 FCF of $718.6 million, bringing TTM FCF to $3,082.9 million, or a FCF yield of 26.6%. In the 1H22, Viatris retired $1.5 billion in debt, which puts the company well on track to achieve its FY22 debt paydown target of $2.0 billion. While the company lowered FY22 revenue guidance to be in a range of $16.2-16.7 billion, compared to previous guidance for revenue of $17-17.5 billion, this revision is solely attributable to the incremental impact of FX headwinds. The company reaffirmed FY22 guidance for Adjusted EBITDA of $5.8-6.2 billion (36.5% margin at midpoint) and FCF of $2.5-2.9 billion, or a forward FCF yield of 23.3%. The company generated approximately $84 million in new product revenues in 2Q22, bringing 1H22 revenues to $205 million, which were primarily driven by interchangeable Semglee in the US, and the company remains on track to achieve ~$600 million (3.7% of FY22 guided revenue at the midpoint) in FY22 new product revenues.”
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Disclosure. None. Goldman Sachs' Cheap Dividend Stocks is originally published on Insider Monkey.
