Last week’s final reading of a negative 1.5% gross domestic product for the first quarter (the first such print since the second quarter of 2020) was even worse than the preliminary reading, and it is a good sign that things could get worse before they get better. The highest inflation in 41 years, the ongoing war between Russia and Ukraine, supply-chain issues and a host of additional woes continue to pressure the equity markets. Many investors are getting nervous, especially with the Nasdaq already dipping in and out of bear market status, and the S&P 500 hitting the 20% down level at one point.
The late-week rally was a relief to many investors, and it may indeed have some legs left, but the reality is that inflation is not going away soon, and it is possible we could see a sharp reversal of the recent buying. In addition, if second-quarter GDP does not come in positive, then we are in a recession already.
We decided to screen the Goldman Sachs Conviction List, looking for ideas for concerned investors that come with the biggest dividends of the group. The reason that these dividend-paying stocks make sense now is that they are the very best ideas from one of the top investment banks, not just on Wall Street, but around the world. They are just the ticket for providing investors solid total return.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bank of America
This company posted very solid first-quarter results. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
This bank has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Banks, almost regardless of size, are a solid idea, as the potential for higher net interest income on portfolio loans to homeowners, farmers and small business owners is one of the strongest tailwinds in a rising-rate environment. Banks can achieve better returns on their cash balances while achieving higher rates of returns from customers who come in for loans.
Bank of America stock investors receive a 2.27% dividend. The Goldman Sachs target price is $47, and the consensus target is $48.28. Friday’s closing share price was $37.02.
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