Investing

Dividend Lovers Bet Big on 6 'Strong Buy' Goldman Sachs Conviction List Picks for Rest of 2023

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The artificial intelligence rally this year, led by the so-called Magnificent 7, has been awesome if you owned those stocks. However, most of the S&P 500 has been treading water, and they are unlikely to catch up to the hype-driven AI stocks any time soon. One thing is for sure. With the looming storm clouds on the horizon and the potential for as many as two more interest rate increases, many Wall Street strategists feel we will be fortunate to have high single-digit gains for the balance of 2023, and we could very well have a 20% or bigger sell-off added to the mix at some juncture.
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We screened the Goldman Sachs Conviction List of top stock picks looking for dividend-paying blue chips that worried investors can look at now. Six top companies hit our screens, all of which are of course rated Buy. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up some. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company sports a sizable dividend and has a solid place in natural gas and liquefied natural gas (LNG).

The Upstream segment participates in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with LNG; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operates a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.

Chevron posted strong second-quarter results and remains one of the best ways to play energy safely.

The company offers a 3.78% dividend. Goldman Sachs has a $187 target price on Chevron stock. The consensus target is $185.36, and shares closed on Friday at $160.90.

JPMorgan Chase

This stock trades at a still reasonable 10.7 times estimated 2023 earnings. JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm and one of the largest banking institutions in the United States, with about $2.6 trillion in assets.
The company as it is today was formed through the merger of retail bank Chase Manhattan and investment bank J.P. Morgan. The firm has many operating divisions, including investment and corporate banking, asset management, retail financial services, commercial banking, credit cards and financial transaction services.
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Top analysts are quite positive on the stock, largely because the industry titan faces a continued broad recovery in nearly every aspect of its business:

  • Its leading M&A advisory and capital markets product set and market share.
  • The massive footprint of corporate and commercial banking customers.
  • Its sizable wholesale payments businesses.

The company has proven that it has the wherewithal to continually invest in people, products and platforms to further its market share base, extending its competitive advantage versus most peers.

Investors receive a 2.69% dividend. The Goldman Sachs price objective is $173, and JPMorgan Chase stock has a consensus target of $154.43. The shares closed on Friday at $148.97.

Macy’s

The venerable retailer has held its own this year and has big upside potential, especially as we approach the fall and holiday season. Macy’s Inc. (NYSE: M) is an omnichannel retail organization that operates stores, websites and mobile applications in the United States.

The company sells a range of merchandise, such as apparel and accessories for men, women and kids; cosmetics; home furnishings; and other consumer goods under the Macy’s, Bloomingdale’s, and bluemercury brands. It also operates in Dubai, the United Arab Emirates, and Al Zahra, Kuwait, under license agreements.

Shareholders receive a 4.40% dividend. The $23 Goldman Sachs target price is higher than the consensus target of $17.18. Macy’s stock closed on Friday at $15.12 a share.

Merck

This remains a leading health care pick for conservative investors. Merck & Co. Inc. (NYSE: MRK) operates as a health care company worldwide 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 as well as managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. It also serves physicians and physician distributors, veterinarians and animal producers. The company has collaborations with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics and Gilead Sciences.

Merck stock comes with a 2.68% dividend. It is the top health care play on the Goldman Sachs Conviction List. The firm’s $131 target price compares with a consensus target of $123.87 and Friday’s closing print of $109.30.

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’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 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.

The dividend yield here is 1.46%. Goldman Sachs has set its price target at $175, while the consensus target is $165.71. Republic Services stock ended trading on Friday at $146.28.

Southern Company

This large-cap utility leader makes sense for very conservative investors. Southern Company (NYSE: SO) engages in the generation, transmission and distribution of electricity. It constructs, acquires, owns and manages power generation assets, including renewable energy and battery energy storage projects. and sells electricity in the wholesale market.

The company distributes natural gas in Illinois, Georgia, Virginia and Tennessee, as well as provides gas marketing services, wholesale gas services and gas pipeline investments operations. It constructs, operates, and maintains 75,924 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial and industrial customers.

It serves approximately 8.6 million electric and gas utility customers. It also owns or operates 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear-generating stations, 13 combined cycle/cogeneration stations, 44 solar facilities, 13 wind facilities, one fuel cell facility and one battery storage facility. And it provides products and services in the areas of energy efficiency and utility infrastructure. In addition, the company offers digital wireless communications and fiber optics services.

Shareholders receive a 4.04% dividend. Southern Company stock has an $80 price objective at Goldman Sachs. The consensus target is $73.87, and shares closed at $67.81 on Friday.


These more defensive companies can continue to thrive if we slip into a recession and the market reverses back into sell-off mode. They should be able to hold their own if the risk-off contingent returns in a big way. All are among the leaders in the respective sectors and should continue paying their dependable dividends.

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