Dividends from corporate America are poised to tumble this year, but there are pockets of promise for investors looking for safe income, according to strategists at Goldman Sachs Group Inc.

While payouts among S&P 500 companies could drop 25% this year, paced by energy and consumer-related companies, banks like Wells Fargo & Co. and drugmakers including Merck & Co. are likely to buck the trend, strategists including Cole Hunter and David Kostin said. The team laid out 40 picks for “income-oriented” investors, with many of them having made payouts for more than two decades without ever lowering distributions.

These stocks “have high dividend yields, ample cash, healthy balance sheets, and reasonable payout ratios,” the strategists wrote in a note to clients. “We believe investors are overly pessimistic with respect to the magnitude of the near-term dividend decline and the subsequent pace of recovery.”

Companies with high dividends have drawn investors in recent years as bond yields slipped toward record lows, boosting the allure of equity income. That appeal is now under threat as a dozen or so companies in the S&P 500 have begun slashing payouts amid weakening profits. The spread of the coronavirus could lead to a 33% drop in earnings this year, Goldman forecast.

Ford Motor Co. suspended its dividend while Apache Corp. cut its payout to a fraction of its prior level. Reductions have also occurred in the restaurant, hotel and department-store industries. Investors should expect more of the same over the next nine months, Goldman predicts, as Covid-19 sweeps across the U.S. disrupting lives and livelihoods.

“Certain large dividend-paying industries are particularly vulnerable to the economic shock of the coronavirus outbreak and the collapse in crude oil prices,” the strategists wrote.

Companies accepting financial aids under the coronavirus relief bill, known as the CARES Act, can’t lay off workers and will be barred from buying back shares and doling out dividends. Even among firms that aren’t accepting CARES funds, Goldman said “the optics” of paying dividends while laying off or furloughing workers may also stymie additional payouts.

Still, there are signs that investors may have turned too bearish about the outlook, the strategists suggested. In the derivatives market, swaps on S&P 500 dividends appear to price in an annualized increase of just 0.7% over the next 10 years. That’s much lower than the growth rate of 3.6% expected by Goldman.

Goldman screened stocks in the Russell 1000 Index for companies that offer high dividend yields and security of payouts. Financial companies made up the most-represented sector in the list with 13 picks.

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