Investing in dividend stocks can be a smart move for investors looking to boost their portfolio returns, especially as the U.S. economy continues to show signs of improvement. According to Bank of America, select dividend-paying stocks have historically performed well during economic recovery phases, making them an attractive option for investors.
In a recent note, Bank of America’s equity and quant strategist, Savita Subramanian, highlighted the potential benefits of dividend stocks in the current market environment. She pointed out that the bank’s U.S. regime indicator has shown improvement for the second consecutive month in February, indicating that the economy is in a recovery phase.
Subramanian emphasized the importance of seeking out companies with above-market dividend yields that are secure and not stretched. She suggested looking at companies in quintile two of the Russell 1000 by trailing dividend yield, as they represent the second-highest tranche of dividend yielders in the index. This approach helps to avoid owning distressed companies that may move into the highest dividend yield group if prices fall ahead of dividend cuts.
Some of the names on Bank of America’s list of recommended dividend stocks include Chevron, American Electric Power, Consolidated Edison, Fifth Third Bancorp, Essex Property, and Park Hotels & Resorts. These companies offer attractive dividend yields and have received positive ratings from analysts, making them potentially good investment opportunities.
Overall, investing in dividend stocks can be a lucrative strategy for investors seeking income and better breadth in their portfolios. By focusing on companies with secure dividend yields and strong fundamentals, investors can potentially benefit from both income and capital appreciation in the long run.
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