Investing

Goldman Sachs Has 5 Conviction List Dividend Stocks to Buy That Fight Inflation

While the ongoing Russia-Ukraine saga stays in the headlines, the other item that Wall Street is the most focused on is the raging inflation that continues to push higher. The January readings for both the consumer and producer price indexes came in white hot. While some feel that we could be close to a peak in the highest inflation numbers in 40 years, citing the strong January retail sales, others feel that the peak may not hit until the summer.

If there is any data set that can stir arguments among economists it is probably consumer and producer price index numbers, and with good reason. Rising consumer and producer prices can signal the start of an inflationary period for an economy, and even moderate inflation can rapidly erode purchasing power and can create uncertainty as businesses have more difficulty estimating future costs. The numbers we are seeing now are the worst since 1982, and everything across the board is rising in price.

However, some companies are almost impervious to inflation. Hard assets, commodities, real estate, utilities and other areas often can perform well in an inflationary and a rising interest rate environment. We screened the Goldman Sachs Americas Conviction List of top stock picks looking for the kind of companies that can fare well in 2022 and found five that pay reliable dividends and look like very solid ideas. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Alcoa

This company could be a solid play for more conservative investors looking to the mining sector. Alcoa Corp. (NYSE: AA) produces and sells bauxite, alumina and aluminum products. The company offers aluminum sheets for the production of cans for beverage and food.

Alcoa also engages in the aluminum smelting, casting and rolling businesses, as well as generation and sale of renewable energy and provision of ancillary services. The company was known as Alcoa Upstream until it changed its name to Alcoa in October 2016.

The analysts said this recently about inflation-related issues at the company:

While we note meaningful investor focus on cost inflationary pressures in Europe, we note that the leverage to higher aluminum and alumina prices should outweigh the impact of higher power prices. We believe that the ~16% underperformance in shares relative to peer, Norsk Hydro is unwarranted, and with the energy cost impact now better understood, see runway for the shares to re-rate higher

Shareholders receive a 0.51% dividend. The Goldman Sachs price target on Alcoa stock is $88. The consensus target is just $71.36, less than the most recent close at $78.20 per share.

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