GOLDMAN SACHS: Buy these 15 high-yielding, cash-rich stocks as coronavirus uncertainty forces companies to slash dividend payments

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• Cole Hunter, vice president of US portfolio strategy at Goldman Sachs, set out to find highly-reliable, cash-heavy, high-yielding dividend stocks to scoop up in the wake of the coronavirus-induced sell-off.
• He notes that income-oriented investors may want to consider stocks with high dividends and a strong capacity to continuously spit out cash in a world where 10-year US Treasury bonds are yielding peanuts.
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As markets ebb and flow with the latest coronavirus developments, income-oriented investors may be starting to question how safe their dividend streams are.

After all, companies like Boeing (BA), Delta Air Lines (DAL), Ford (F), Marriot (MAR), and Macy's (M) have already suspended their dividend payments in the wake of the fallout.

Normally, investors could seek solace in traditional safe-haven investments like US Treasurys. But today, the prevailing interest rate environment is anything but normal.

"With 10-year US Treasury yields at 0.8%, income-seeking investors should consider stocks with both high dividend yields and the capacity to maintain the distributions," said Cole Hunter, vice president of US portfolio strategy at Goldman Sachs. "We forecast S&P 500 dividends will decline by 25% to $44 per share in 2020."

Hunter provided the following charts for reference. The chart on the left shows Goldman's S&P 500 annual earnings-per-share and dividends-per-share estimates for 2020 and 2021. The chart on the right shows Goldman's estimates for earnings and dividend growth in 2020 with the Financial Crisis (red) and Great Depression (light blue) highlighted for historical reference.

FactSet, Goldman Sachs Global Investment Research

With a sizable drawdown in dividends and earnings looking increasingly likely to Hunter, he set out to pin down stocks with dividends that were shielded from the mayhem. He scoured the Russell 1000 and employed a plethora of quality-focused metrics to arrive at his choices.

Here's the criteria he established his search upon. The median stock on his list has the following characteristics:

• "An investment-grade issuer rating of A-"
• "A track record of 90 consecutive quarters (23 years) of dividend payments without a cut"
• "A dividend yield ranking in the 94th percentile compared with how the shares have traded during the past 40 years"
• "A 47% dividend payout ratio using realized 2019 EPS that translates into a 'shocked' payout ratio of 71% after reducing last year's earnings by 33%"
• "An equity cap of $23 billion vs. $8 billion for the index"
• "Trades at a trailing 12-month P/E multiple of 11x vs. 14x for the typical Russell 1000 company"

By leveraging this methodology, Hunter arrived at 15 selections with "high dividend yields, ample cash, healthy balance sheets, and reasonable payout ratios."

Listed below are the 15 stocks he identified, ranked in increasing order of annual dividend yield.

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