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CVS stock yields 3.2%.
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As the economy worsens, Treasuries aren’t necessarily the only refuge for investors.
“During Uncertainty, Focus on Sustainable Dividend Growers” read the headline of a UBS equity research note on Friday.
The report cites a difficult investing backdrop that includes “continued inflation concerns, violent moves in the yield curve, and the market forecasting future Fed rate cuts.”
The report’s authors compiled a list of 30 stocks, with three-year dividend growth rates at least in the mid-single digits, based on the projections of UBS analysts. All have Buy ratings from that firm.
Other criteria for the stock screen included having a dividend yield above the 1.7% average for the S&P 500 and sustainable payout ratios. The payout ratio measures the percentage of earnings that get paid out in dividends.
The report observes that “S&P 500 dividend growth has been significantly less volatile than [earnings per share] and buyback growth and therefore should be more resilient.”
It also maintains that “dividend stocks can provide a margin of safety during uncertain times.”
Barron’s decided to narrow the list and focus on utilities, whose dividends appear to be durable heading into an economic downturn, and a few other industries.
That includes Eaton (ticker: ETN), which makes a range of products such as electric components, brakes, and cylinders. The stock, which yields 2%, has a one-year return of 11% through March 30, including dividends, compared with minus 10% for the S&P 500. UBS projects Eaton will grow its dividend by 8.6% a year from 2022 through 2025.
Another company on the list is…
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