The wind behind the bear market summer rally was driven by a belief by many that the Federal Reserve was getting close to a pivot on rate policy. Breathless analysts looking at any tiny drop in the inflation data were sure it was a possibility. All that ended when Fed Chair Powell gave the pivot possibilities a knockout punch at the Jackson Hole economic symposium in late August. He basically said higher rates are coming for longer.
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The economic team at Goldman Sachs has surveyed the data and listened to the hawkish commentary coming from Powell and other Fed governors, and the firm is moving its estimates on the upcoming interest rate hikes higher. Goldman Sachs now thinks that the September increase again will be by 75 basis points. That is up from the previous estimate of 50 basis points. In addition, the firm is raising its November increase to 50 basis points from 25 basis points.

We have cautioned about fighting the Fed, whether it is raising or lowering rates. These increases and the ensuing economic downturn that may be inevitable could possibly drive the S&P 500 to 3,400 or lower. The venerable index closed Thursday at 4,006. Bear market rallies like the one this summer can be helpful as investors get the opportunity to sell after big upward moves in the market, and then replace volatile stocks with more conservative dividend plays when stocks trade lower.

We screened the Goldman Sachs Conviction List looking for safe dividend ideas investors can rotate to now to get ahead of what could be a big move lower in the fall. All seven of the chosen stocks are among the top stock ideas from one of the world’s biggest and most successful investment banks. However, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Cheniere Energy

This top liquefied natural gas (LNG) play has made a huge move off the October 2020 lows. Cheniere Energy Inc. (NYSEAMERICAN: LNG) is an energy company primarily engaged in LNG-related businesses. The company operates through two segments.

Cheniere’s LNG terminal segment consists of the Sabine Pass and Corpus Christi LNG terminals. Its LNG and natural gas marketing segment consists of LNG and natural gas marketing activities by Cheniere Marketing.

Cheniere Marketing is developing a portfolio of long- and medium-term sale and purchase agreements with professional staff based in the United States, the United Kingdom, Singapore, and Chile. The company conducts its business through its subsidiaries, including the development, construction, and operation of its LNG terminal business and the development and operation of its LNG and natural gas marketing business.

Investors receive a 0.80% dividend. Goldman Sachs has a $182 price target on Cheniere Energy stock. The consensus target is $172, and shares closed on Thursday at $159.18.

With the potential for extremely cold winter weather, this company may look to extend gains in the final quarter of 2022 and next year. DTE Energy Co. (NYSE: DTE) is the largest utility in Michigan. Its largest operating units are DTE Electric, an electric utility serving 2.2 million customers in southeastern Michigan, and DTE Gas, a natural gas utility serving 1.3 million customers in the state. DTE Energy also has non-utility energy businesses that focus on power and industrial projects, natural gas midstream and energy trading.
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The company’s Gas segment purchases, stores, transports, distributes and sells natural gas to residential, commercial and industrial customers throughout Michigan, and it sells storage and transportation capacity. This segment has approximately 19,800 miles of distribution mains, 1,305,000 service pipelines and 1,273,000 active meters, as well as approximately 2,000 miles of transmission pipelines.

Its Gas Storage and Pipelines segment owns natural gas storage fields, lateral and gathering pipeline systems and compression and surface facilities. It also has ownership interests in interstate pipelines serving the Midwest, Ontario and northeast markets.

The Power and Industrial Projects segment offers metallurgical coke; pulverized coal and petroleum coke to the steel, pulp and paper, and other industries; and power, steam and chilled water production, and wastewater treatment services, as well as supplies compressed air to industrial customers.

Shareholders receive a 2.67% dividend. The Goldman Sachs price objective is $143. DTE Energy stock has a consensus target of $140.25, and Thursday’s closing price was $134.68.

Merck

This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) operates as a health care company worldwide. It operates through the following two segments.

The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular and diabetes, as well as vaccine products, such as preventive pediatric, adolescent and adult vaccines.

The Animal Health segment discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as digitally connected identification, traceability and monitoring products.

Merck serves drug wholesalers and retailers, hospitals and government agencies; managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions; and physicians and physician distributors, veterinarians and animal producers. The company has collaborations with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics and Gilead Sciences.

Merck stock investors receive a 3.17% dividend. Goldman Sachs has set a $106 target price, while the consensus target is $100.14. Thursday’s closing share price was $87.42.

This stock has made a nice run off the lows and is a solid idea for investors who are more conservative. NRG Energy Inc. (NYSE: NRG) operates as an integrated power company in the United States that produces, sells and delivers electricity and related products and services to 3.6 million residential, industrial and commercial consumers.
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NRG Energy generates electricity using natural gas, coal, oil, solar, nuclear and battery storage. It also provides system power, distributed generation, renewable products, backup generation, storage and distributed solar, demand response, energy efficiency, advisory and on-site energy solutions, as well as carbon management and specialty services.

In addition, NRG trades in electric power, natural gas and related commodities; environmental products; weather products; and financial products, including forwards, futures, options and swaps. Further, the company procures fuels; provides transportation services; and directly sells energy, services and products and services to retail customers under the NRG, Reliant, Green Mountain Energy, Stream, XOOM Energy and other brand names.

Investors receive a 3.39% dividend. The $46 Goldman Sachs price objective compares with a $44.09 consensus figure. NRG Energy stock closed on Thursday at $42.32.

Raytheon Technologies

This top aerospace and defense idea has a diversified mix of businesses. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.

With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.

In 2020, United Technologies and Raytheon agreed to merge their businesses to create this new aerospace and defense powerhouse. The two-year-old merger, combined with the spin-off of the Carrier and Otis divisions in 2020, has top analysts across Wall Street expecting free cash flow to step up in a big way this year. Toss in the solid recovery in air travel and improving sentiment that could help drive the commercial aerospace business.

The dividend yield is 2.52%. Raytheon Technologies stock has a $108 price objective at Goldman Sachs. The consensus target is up at $110.06, but shares closed at $86.56 on Thursday.

Republic Services

Despite the economy’s ups and downs, somebody has to pick up the trash and recyclables each week, and this is a leader in the business. Republic Services Inc. (NYSE: RSG) offers environmental services in the United States, including collection and processing of recyclable materials; collection, transfer and disposal of non-hazardous solid waste; and other environmental solutions.
Republic Services collection services include curbside collection of material for transport to transfer stations, landfills or recycling processing centers; supply of recycling and waste containers; and renting of compactors. In addition, the company engages in the processing and sale of old corrugated containers, old newsprint, aluminum, glass and other materials, and in provision of landfill and transfer services.
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The company also offers disposal of nonhazardous solid and liquid material and in-plant services, such as transportation and logistics. It serves small-container, large-container and residential customers. As of December 31, 2021, the company operated through 356 collection operations, 239 transfer stations, 198 active landfills, 71 recycling processing centers, six saltwater disposal wells and seven deep injection wells, as well as three treatment, recovery and disposal facilities in 41 states. It also operated 77 landfill gas-to-energy and renewable energy projects and had 124 closed landfills.

Republic Services stock comes with a 1.38% dividend. Goldman Sachs’s $175 price target is well above the $156.86 consensus target. Thursday’s close was at $148.00.

Walmart

The giant retailer has posted solid results over the past year, and it is a top idea in an inflationary environment, when consumers look for value. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States, as well as a growing e-commerce business. Internationally Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. It had fiscal 2021 revenue of nearly $560 billion, and Walmart employs approximately 2.2 million associates worldwide.

Shareholders receive a 1.65% dividend. The Goldman Sachs price target is $155. The consensus target was last seen at $149.45. Walmart stock ended Thursday trading at $136.43.

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These top stocks all have reasonable upside to the Goldman Sachs targets, and they all come with dependable dividends. With even a moderate appreciation in the share prices, investors should be looking at double-digit percentage total return potential. In a market that remains quite long in the tooth, despite the horrific first half, and an economy that is sputtering, these dependable companies make a ton of sense for nervous investors now, as we are likely in a recession already and interest rates are expected to go much higher this year.

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