Shareholder returns will fall 40% this year, Goldman says. Here are some safe dividend plays Published: April 30, 2020 at 7:28 a.m. ET

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It’s hard out there for anyone depending on investments for income.

Even as bond yields TMUBMUSD10Y, 0.581% have fallen to all-time lows, companies are reducing dividends. So far this year, at least 30 S&P 500 index SPX, -1.42% companies have announced plans to lower their dividends or cut them altogether, according to an analysis from Goldman Sachs.

Goldman’s research shows investors should expect overall dividends to fall 23% in 2020, but also offers some suggestions on companies that have strong balance sheets and are likely to preserve their dividends.

 

The table below shows the top company in each S&P 500 sector that meets Goldman’s criteria of “high dividend yields, healthy balance sheets, and reasonable payout ratios.”

COMPANY, BY SECTOR ANNUAL DIVIDEND YIELD CONSECUTIVE QUARTERS WITHOUT DIVIDEND REDUCTION
Communications Services
Omnicom Group Inc. OMC, -5.31% 5% 50
Consumer Discretionary
Home Depot Inc. HD, -0.99% 2.8% 128
Consumer Staples
Archer-Daniels-Midland Co. ADM, -3.30% 4% 23
Financials
Wells Fargo & Co. WFC, -3.25% 7.6% 39
Health Care
Merck & Co. Inc. MRK, -1.30% 3% 156
Industrials
Raytheon Technologies Corp. RTX, -4.09% 4.6% 15
Information Technology
International Business Machines Corp. IBM, -2.19% 5.2% 102
Materials
Nucor Corp. NUE, -2.32% 4.3% 41
Real Estate
Regency Centers REG, -0.94% 6.7% 39
Utilities
CenterPoint Energy Inc. CNP, -4.57% 7.0% 55
Source: Goldman Sachs analysis

It’s not just dividends that will suffer in the cash-strapped downturn. Goldman forecasts a 50% decline in share buybacks. Between those two categories, overall return to shareholders will fall 40% from last year.

The forecast also calls for a 9% decline in research and development, and for a 27% reduction in capital expenditures, a reminder that businesses are prioritizing survival over growth and innovation.

Editor’s note: CenterPoint Energy Inc. announced a dividend cut April 1.

Originally Published on MarketWatch

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