Amidst persistent market volatility and evolving geopolitical trade dynamics, investors are increasingly seeking stability and consistent returns. In this climate, Goldman Sachs has identified a strategic investment approach centered on companies demonstrating robust dividend growth. This strategy offers a potential hedge against market fluctuations and aims to provide a reliable income stream for portfolios, particularly as market sentiment remains cautious following President Donald Trump’s announcements regarding new tariffs on key trading partners.
- Goldman Sachs advocates for an investment strategy focused on companies with strong dividend growth.
- The selection methodology prioritizes a minimum 2% dividend yield, 5% compound annual dividend growth, and a 1x dividend coverage ratio through fiscal year 2026.
- Several major banks, including Citigroup, Wells Fargo, and Bank of America, announced significant dividend increases after successful Federal Reserve stress tests.
- NextEra Energy and American Electric Power are noted for strong dividend growth prospects within the utilities sector.
- Companies like Lowe’s and American Homes 4 Rent reaffirmed their financial targets, signaling resilience despite recent stock performance.
Goldman Sachs’s methodology for selecting these dividend-focused companies emphasizes not just current yield, but also the sustainability and growth trajectory of dividend payouts. Their rigorous selection process applied three key criteria for projected performance through fiscal year 2026:
- A dividend yield equal to or exceeding 2% for the fiscal year spanning July 2025 to June 2026.
- A minimum compound annual growth rate of 5% in dividend per share between 2024 and 2026.
- A dividend coverage ratio of at least 1x, indicating strong financial capacity to sustain these payments.
Based on these stringent criteria, Goldman Sachs has highlighted a selection of companies positioned for significant dividend and total return growth. The comprehensive list spans various sectors, reflecting diversified opportunities for investors seeking resilient income-generating assets.
| Company | Estimated Yield 2025 (%) | Annual Dividend Growth (%) | Upside Potential (%) |
| Citigroup | 3.1 | 26 | 13 |
| Wells Fargo | 2.1 | 20 | 15 |
| Bank of America | 2.4 | 14 | 18 |
| NextEra Energy | 3.2 | 10 | 31 |
| Cummins | 2.3 | 10 | 32 |
| Lowe’s | 2.2 | 8 | 16 |
| American Electric Power | 3.6 | 7 | 16 |
| BlackRock | 2 | 6 | 6 |
| American Homes 4 Rent | 3.3 | 5 | 25 |
| Johnson & Johnson | 3.4 | 5 | 15 |
Financial Sector Strengths
The banking sector features prominently in Goldman’s recommendations, particularly after major institutions demonstrated exceptional resilience in the latest Federal Reserve stress tests. Following these successful evaluations, Citigroup, Wells Fargo, and Bank of America have all announced significant increases to their quarterly dividends. Bank of America is set to raise its quarterly dividend by 8% to 28 cents per share from the third quarter of 2025. Wells Fargo will increase its dividend from 40 to 45 cents, a 12.5% rise, while Citigroup will add 4 cents, bringing its payout to 60 cents per share. Goldman Sachs anticipates these three financial institutions will achieve double-digit growth in both dividends and total return through 2026, underscoring their robust financial health and commitment to shareholder returns.
Utilities and Real Estate Outlook
The utilities sector also presents compelling opportunities for dividend growth, with NextEra Energy and American Electric Power highlighted in Goldman’s analysis. NextEra, a dominant player in U.S. wind energy development with 119 active projects, projects a 3.2% dividend yield in 2025 and a 10% growth rate through 2026. This positive outlook persists despite a recent 3.5% stock decline following President Donald Trump’s order eliminating certain renewable energy subsidies, demonstrating the company’s underlying strength. Meanwhile, American Electric Power is expected to offer a 3.6% yield and 7% dividend growth. Within real estate, American Homes 4 Rent, which specializes in single-family rental properties across 24 states, is projected to yield 3.3% for 2025. The company reaffirmed its 2025 outlook for core operating earnings per share, underscoring its financial stability despite a 5% stock retreat year-to-date, reflecting its stable business model in a dynamic housing market.
Consumer and Industrial Resilience
Beyond these core sectors, Goldman Sachs’s list includes companies like Lowe’s and Cummins, each offering unique strengths and resilience. Despite a nearly 9% decline in its stock year-to-date, home improvement retailer Lowe’s reaffirmed its annual financial targets in May 2025, signaling confidence in navigating housing market challenges and consumer spending shifts. Goldman forecasts a 2.2% dividend yield and 8% growth for the company, indicating belief in its long-term stability. Cummins, a leading manufacturer of engines and power generation products, is also noted for its robust dividend growth prospects, projecting a 2.3% yield and 10% growth, driven by its diversified product portfolio and global demand. These selections underscore a broader investment thesis: prioritizing companies with strong financials, proven adaptability, and a demonstrated commitment to increasing shareholder returns, even in an uncertain economic landscape.
Sophia Patel brings deep expertise in portfolio management and risk assessment. With a Master’s in Finance, she writes practical guides and in-depth analyses to help investors build and protect their wealth.