The Tell: Shareholder returns will fall 40% this year, Goldman says. Here are some safe dividend plays

The Tell

Goldman reckons dividend payments will fall 23% this year

Raytheon shares have a 4.6% dividend yield and the company has a consistent track record of protecting its payout to shareholders, according to a Goldman Sachs analysis.


Bloomberg News/Landov

It’s hard out there for anyone depending on investments for income.

Even as bond yields
TMUBMUSD10Y,
0.622%

have fallen to all-time lows, companies are reducing dividends. So far this year, at least 30 S&P 500 index
SPX,
+2.65%

companies have announced plans to lower their dividends or cut them altogether, according to an analysis from Goldman Sachs.

Goldman’s research shows investors should expect overall dividends to fall 23% in 2020, but also offers some suggestions on companies that have strong balance sheets and are likely to preserve their dividends.

Related:These funds were made to protect against market downsides. So how’d they do in March?

The table below shows the top company in each S&P 500 sector that meets Goldman’s criteria of “high dividend yields, healthy balance sheets, and reasonable payout ratios.”

Company, by sector

Annual dividend yield

Consecutive quarters without dividend reduction

Communications Services

Omnicom Group Inc.
OMC,
+8.60%
5%

50

Consumer Discretionary

Home Depot Inc.
HD,
+1.92%
2.8%

128

Consumer Staples

Archer-Daniels-Midland Co.
ADM,
+3.33%
4%

23

Financials

Wells Fargo & Co.
WFC,
+3.91%
7.6%

39

Health Care

Merck & Co. Inc.
MRK,
-0.50%
3%

156

Industrials

Raytheon Technologies Corp.
RTX,
+3.83%
4.6%

15

Information Technology

International Business Machines Corp.
IBM,
+1.91%
5.2%

102

Materials

Nucor Corp.
NUE,
+4.96%
4.3%

41

Real Estate

Regency Centers
REG,
+9.57%
6.7%

39

Utilities

CenterPoint Energy Inc.
CNP,
+1.60%
7.0%

55

Source: Goldman Sachs analysis

It’s not just dividends that will suffer in the cash-strapped downturn. Goldman forecasts a 50% decline in share buybacks. Between those two categories, overall return to shareholders will fall 40% from last year.

The forecast also calls for a 9% decline in research and development, and for a 27% reduction in capital expenditures, a reminder that businesses are prioritizing survival over growth and innovation.

See:Will U.S. stocks lurch lower from here? Look to past ‘waterfalls’ for context

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