Boost your portfolio with stocks offering sustainable dividends, Bank of America says
Whether investors are fending off choppy markets or grappling with fears of stagflation, stocks that offer attractive but sustainable yields can help protect their portfolios, Bank of America found. The S & P 500 touched a new all-time high on Thursday after President Donald Trump announced that Israel and Lebanon have agreed to a10-day ceasefire . Oil was still positive on the day, with Brent crude futures up more than 4% and ahead more than 37% since the start of the U.S.-Israel war with Iran in late February. “The war with Iran poses risk of a stagflation shock,” wrote Bank of America’s head of U.S. equity strategy and U.S. quantitative strategy Savita Subramanian in a Thursday report. “Our analysis of factor performance during periods of below-trend growth and above trend inflation since 1987 indicates that Quality and Cash Deployment groups fared best.” “If we are returning to a total return world in which the contribution of dividends to total market returns could be higher than during the zero interest rates period, we advise investors to seek out companies with above-market but not stretched dividend yields,” she added. With the S & P 500 offering a meager dividend yield of about 1.1%, “above-market” dividend yields are a more achievable bogey. To that end, Bank of America screened the Russell 1000, searching for names in the second quintile for trailing dividend yield. Companies in this cohort are less likely to be distressed compared to their peers in the first quintile – that is, firms offering the highest dividend yield. Companies with the highest dividend yields can prove riskier for investors. First, those high yields may mean that the stock price is on a sharp, downward trajectory. Second, the companies with the highest dividend yield may be more inclined to chop their payments if they are under financial pressure. Here are a few stocks that turned up in Bank of America’s screen. PepsiCo is a dividend aristocrat, having announced a 4% dividend hike in February, its 54th consecutive year of increases. On Thursday, PepsiCo reported first-quarter adjusted earnings of $1.61 per share on revenue of $19.44 billion, topping the LSEG consensus estimate of $1.55 per share and $18.94 billion. The company’s North American food business saw an increase in volume for the first time in two years, benefiting from PepsiCo’s move to slash prices on Lay’s potato chips and Doritos corn chips. Piper Sandler has an overweight rating on PepsiCo and analyst Michael Lavery lifted estimates for 2026 earnings two cents to $8.65 per share. “Despite growing macro uncertainty, PEP looks well-positioned and on-track for its 2026 targets, with 1Q26 results ‘slightly ahead’ of plans,” he said, noting that while costs in 2027 will be inflationary, PepsiCo has time to make adjustments in anticipation. Shares of PepsiCo are up roughly 10% in 2026 and the stock offers a dividend yield of 3.6%. Citizens Financial is a Providence, Rhode Island-based, $28 billion regional bank that just reported first-quarter earnings of $1.13 per share on Thursday, topping the FactSet consensus estimate of $1.09 a share. The bank shared a positive outlook for net interest income in the current quarter, calling for growth of 3% to 4% — that is, $1.609 billion to $1.624 billion. That compares to a $1.60 billion consensus analysts surveyed by FactSet. Cantor Fitzgerald analyst Dave Rochester reiterated the firm’s overweight rating and top pick designation on Citizens after the results. “We see several positives in the print and new disclosure that could be well received by investors,” he said in a Thursday report. Shares of Citizens Financial are up 10% in 2026, and the stock has a current dividend yield of about 2.9%. Other stocks on Bank of America’s list include Xcel Energy , American Electric Power, Chord Energy , Target , Mosaic and IBM .
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