![Dividend stocks are poised to outperform, says Bank of America. Here are names on the list 1 Dividend stocks are poised to outperform, says Bank of America. Here are names on the list](https://www.trendfeedworld.com/wp-content/uploads/2024/04/Dividend-stocks-are-poised-to-outperform-says-Bank-of-America.jpeg)
According to Bank of America, the US economy is showing a signal that is favorable for dividend stocks. In March, the US Regime Indicator – an economic gauge – posted its biggest gain since July 2021 after entering a recovery phase in February, equity and quantitative strategist Savita Subramanian wrote in a note on Wednesday. In this environment, investors want to own dividend stocks with above-market yields, she said. “High Div Yield has led 88% of the time during previous recoveries. This factor remains cheap and also neglected… and could benefit investor income streams if the Fed starts cutting rates,” Subramanian said . When it comes to selecting names, look for companies that pay above-market returns that are safe and not stretched, Subramanian wrote in her note. In terms of these characteristics, she looks at quintile two of the Russell 1000 by lagging dividend yield. This includes the second highest tranche of dividend yields in the index. Her screen protects against owning distressed companies that could move into the first quintile, the group with the highest dividend yield, if prices rise above potential dividend cuts. Here are some of the names on Bank of America's list for April. AES and Sempra are two utilities that cut prices, yielding 4% and 3.4% respectively. In general, utilities are known for their predictable dividends. Although they lagged the overall market this year, some gains have been made in recent months. The Utilities Select Sector SPDR Fund (XLU) is up 5% so far this year, and 4.9% over the past month. In late February, Sempra CEO Jeffrey Martin told CNBC's Jim Cramer that the company has increased its capital plan to $48 billion to fund initiatives such as modernizing the electric grid and moving renewables onto the grid more quickly. “A record $48 billion capital plan truly lays out a roadmap for our future growth and should support interest-based growth at our utilities in the range of 9% to 10%,” he said on “Mad Money.” Sempra shares are down about 4% so far this year, while AES is down almost 10%. There are also several energy names on the list, including APA and HF Sinclair. APA has a dividend yield of 3.1%, while HF Sinclair yields 3.5%. In January, APA announced a deal to acquire Callon Petroleum in a $4.5 billion all-stock transaction. The deal adds to APA's “backbone” in the U.S. Permian Basin, APA CEO John Christmann said in an interview with CNBC in February. Shares of APA are down almost 10% year to date, while HF Sinclair is up about 3% for the period. Finally, Citigroup was one of the financial names highlighted by Bank of America. Citi posted better first-quarter revenue earlier this month, partly thanks to better-than-expected results in its investment banking and trading divisions. Shares are up 22% so far this year.