Investing

Goldman Sachs Say’s Bear Market Not Over Yet - 7 'Strong Buy' Conviction List Dividend Ideas for 2023

Lee Jackson

Published: November 22, 2022 7:15 am

Unless you are a hedge fund portfolio manager who has spent 2022 shorting tech stocks and cryptocurrencies, like most investors you are more than ready to flip the calendar, and with just over 5 weeks left in the year, that’s right around the corner.  However, those looking for a new year to usher in a fresh bull market may be a little disappointed if the strategists at Goldman Sachs are correct.

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The team at Goldman Sachs (like many on Wall Street) doesn’t feel that we have hit the capitulation trough that is so needed to put a bear market back into hibernation. In fact, they think that the S&P 500 ends 2023 at the 4000 mark on the venerable index, less than 1% down from the current trading level, citing rising interest rates and valuations that are still too high. They also think the rally from the October lows is not sustainable.

Given that rather grim outlook, we decided to screen the Goldman Sachs Conviction List of top stock ideas for large cap blue chips that can wrestle the bear in 2023, and still provide positive total return. Seven stocks that pay dividends look like outstanding ideas for growth and income investors, and while all are rated Buy, it’s important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.

Bank of America

Interest rate increases are welcomed by banks, and this is one of the biggest in the country. Bank of America Corporation (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. Operating 5,100 banking centers, 16,300 ATMs, call centers, and online and mobile banking platforms.

Bank of America has expanded into a number of new U.S. markets, with scale across the country positioning them ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to substantially increase investment over the next few years without notably jeopardizing returns, driving further market share gains.

Shareholders are paid a 2.37% dividend. Goldman Sachs has a $41 target price. The Wall Street consensus price target is posted at $41.31. The shares were last seen Monday at $37.31. It should be noted that Warren Buffett owns a stunning 1.1 billion shares of the bank.

Constellation Brands

If there is any company where the products stay in style it’s this one, which only has 7% foreign sales. Constellation Brands Inc. (NYSE: STZ) is a leading global producer and marketer of beverage alcohol. Its wide-ranging portfolio spans wine, spirits, and imported beer.

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The company is one of the world’s largest wine companies overall and is the largest global premium wine company. Key brands include Robert Mondavi, Clos du Bois, Blackstone, Arbor Mist, Black Velvet, and SVEDKA vodka. It also owns 100 percent of the rights to brew, market, and sell Modelo’s Mexican beers in the US.

The company made a gigantic $3.8 billion investment in cannabis company Canopy Growth Corporation in 2018 to increase its holdings in the company. The record investment reflects a world in which pot has become ubiquitous as its counterculture stigma fades and more states legalize use.

Investors are paid a 1.29% dividend. The Goldman Sachs team has their price target posted at $273, and the consensus is set higher at $275.77. The final trade for Monday was reported at $252.42.

Merck

This company remains a leading healthcare stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health.

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 PLC; Bayer AG; Eisai Co., Ltd.; Ridgeback Biotherapeutics; and Gilead Sciences, Inc. to jointly develop and commercialize long-acting treatments in HIV.

Investors are paid a solid 2.65% dividend. Goldman Sachs has a $110 target price. Merck has a consensus target across Wall Street of $100.90, which compares with Monday’s closing print of $105.61.

NRG

This company has made a nice run off the lows and is a solid utility idea for more conservative investors. NRG Energy, Inc. (NYSE: NRG) together with its subsidiaries, operates as an integrated power company in the United States. It operates through Texas, East, and West. The company is involved in producing, selling, and delivering electricity and related products and services to 3.6 million residential, industrial, and commercial consumers.

The company generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage. The company also provides system power, distributed generation, renewable products, backup generation, storage, distributed solar, demand response, energy efficiency, advisory, and on-site energy solutions; and carbon management and specialty services.

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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 are paid a very safe and solid 3.31% dividend. The Goldman Sachs price objective is $49, and that compares with a consensus figure which is posted at $45.10. The shares closed Monday at $41.16.

PepsiCo

This is a top consumer staples stock that will be supplying the goods for football tailgates and parties. PepsiCo, Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lays and Ruffles potato chips; Doritos, Tostitos, and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips, and Fritos corn chips.

The company’s Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola, and oat squares; Pearl Milling mixes and syrups, Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal, and Rice-A-Roni side dishes.

Pepsico’s North America Beverages segment offers beverage concentrates, fountain syrups, and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist, and Mug brands; and ready-to-drink tea and coffee, and juices.

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Shareholders receive a very dependable 2.54% dividend. Goldman Sachs has their price target posted at $185, while the consensus is set at $183.68. PepsiCo shares closed Monday at $184.82.

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), together with its subsidiaries, offers environmental services in the United States. The company offers collection and processing of recyclable materials, collection, transfer, and disposal of non-hazardous solid waste, and other environmental solutions.

The company’s 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 provision of landfill and transfer services.

Republic Services also offers disposal of non-hazardous 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, 6 saltwater disposal wells, and 7 deep injection wells, as well as 3 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.

Shareholders are paid a 1.48% dividend. The Goldman Sachs price target is set at $173, while the consensus was last seen at $152.07. The shares ended trading on Monday at $134.65.

Walmart

The giant retailer posted solid third-quarter results beating estimates, and is a top idea for investors looking for retail winners during this year’s holiday shopping season. Walmart Stores 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 (including Jet.com). 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. With fiscal year 2019 revenue of $514.4 billion, Walmart employs approximately 2.2 million associates worldwide.

Shareholders are paid a 1.50% dividend. The Goldman Sachs analysts have a Buy rating to go with a price target of $160. That compares to the consensus target which is posted at $159.89. Walmart shares were last seen trading Monday at $151.15.

All seven of these top companies have reasonable upside to the Goldman Sachs targets, and they all pay very dependable dividends. With even moderate appreciation in the shares prices of these top companies, investors should be looking at close to double digit total return potential. In a market that remains very long in the tooth, 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, which will deepen over the next 12 months, and face rising interest rates that are expected to go higher this year and in 2023.