Here are the best bets for investors seeking income, according to Goldman Sachs

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Home Depot is one of Goldman Sachs’ best bets for dividends.

It’s hard times for anyone relying on income investments. The stimulus bill signed into law Friday keeps any companies that borrow from the government from paying dividends to shareholders for at least a year after the loan is repaid — even as bond yields have collapsed to to near all-time lows.

That makes it critical for investors focused on income to “consider stocks with both high dividend yields and the capacity to maintain the distributions,” Goldman Sachs strategists wrote in an analysis out Monday.

Earlier coverage:Dividend ETFs may lose out under the $2 trillion coronavirus relief bill

The provisions of the CARE Act likely exacerbate a trend of companies trying to keep as much cash on hand as possible as the economic downturn worsens. The Goldman strategists estimate dividends for S&P 500 stocks will decline 25% to $44 per share in 2020, and note 12 companies, ranging from Apache Corp. APA, -15.33% to Old Dominion Freight Line ODFL, +5.66%, have already reduced or suspended their shareholder payouts.

“We expect significantly more dividend cuts are likely to be announced during April in conjunction with the release of quarterly financial results,” the analysts wrote.

The Goldman team screened the Russell 1000 for companies with an annualized dividend yield greater than 3%, ample cash on hand, healthy balance sheets, and what they call “reasonable payout ratios.” Each of the stocks they identified have not under-performed the rest of the market since the peak, are rated by S&P as at least BBB+.

“The typical stock on our list has paid its dividend for 90 quarters (23 years) without reducing its distribution,” the Goldman strategists wrote. Their full list contains companies from 10 of the 11 S&P 500 sectors; energy is the only one missing. We’ve listed the top — highest-yielding — stock from each of the 10 sectors below.

Company Annual dividend yield Consecutive quarters with no dividend cut Sector
Omnicom Group Inc. OMC, +6.24% 5% 50 Communication services
Home Depot Inc. HD, +3.37% 3.1% 128 Consumer discretionary
Archer-Daniels-Midland ADM, +6.52% 4.3% 23 Consumer staples
Wells Fargo & Co. WFC, -2.76% 6.7% 39 Financials
Bristol-Myers Squibb BMY, +3.65% (tied with Merck & Co. Inc. MRK, +7.86% ) 3.4% 114 Health care, pharmaceuticals
3M Co. MMM, +2.87% (tied with Emerson Electric Co. EMR, +2.24% ) 4.4% 156 Industrials
IBM IBM, +4.20% 6.0% 102 Tech
Nucor Corp. NUE, +5.38% 4.8% 41 Materials
Regency Centers REG, -2.43% 5.9% 39 Real estate
CenterPoint Energy CNP, +0.09% 7.1% 55 Utilties
Source: Goldman Sachs

About one-third of the stocks that wound up on Goldman’s list of 40 are financials. The strategists wrote that their bank equity research analyst colleagues had modelled stress scenarios and found that “banks are in a position to maintain dividends at or close to the current run rate.”

That’s an important caveat given the particularly precarious position for financials now. It’s not just the economic fall-out from the coronavirus pandemic that’s troubling them, but an expected wave of defaults and bankruptcies from the collapse in oil prices.