Bank of America Highlights Sustainable Dividend Stocks for Volatile Markets

Investors seeking stability amid market turbulence should consider dividend stocks, but with a focus on sustainability rather than yield alone, according to Bank of America Securities. With volatility defining the summer trading season — even as the S&P 500 has already surpassed the firm’s year-end target of 5,100 — strategists warn that a deeper pullback may loom.

“Now is not the time to buy the index and close your eyes,” said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Securities, in a Tuesday interview on CNBC’s “Squawk Box.” “You get a 10% correction effectively once a year, on average.”

Dividend payers can offer a relative safe harbor when price appreciation is uncertain, yet Subramanian cautions against chasing the highest yields, which often signal a declining share price or elevated risk of payout cuts. Instead, she recommends targeting companies with above-market but sustainable dividends.

“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-rate period, we advise investors to seek out companies with above-market but not stretched dividend yields,” she wrote in a Friday note. The S&P 500 currently yields approximately 1.02%.

To identify candidates, Subramanian screened the Russell 1000 for names in the second quintile of trailing dividend yield — a tier historically less distressed than the highest-yielding cohort. The following four stocks made the August list.

Chevron (CVX) offers a 3.55% yield and has surged roughly 31% year to date, supported by elevated oil prices tied to Middle East tensions. The energy major reported second-quarter net income of $12 billion, a nearly 400% jump from a year earlier, beating estimates on both revenue and earnings. “We’re kind of firing on all cylinders, which is good, because the world needs it,” CEO Mike Wirth told CNBC. Chevron is a Dividend Aristocrat with more than 25 consecutive years of payout increases. Analysts rate the stock a consensus buy with roughly 8% upside to the average price target.

CVX YTD mountain Chevron year to date

Duke Energy (DUK) yields 3.59% and has gained about 3% this year. The utility posted mixed second-quarter results, with adjusted earnings per share exceeding expectations while revenue fell short. Analysts maintain a buy rating and see nearly 13% upside to the average price target.

DUK YTD mountain Duke Energy year to date

Gap (GAP) delivers a 3.29% yield. Shares have declined roughly 17% in 2024 ahead of its second-quarter report due Thursday after the close. The retailer previously disappointed in May with mixed results and lowered sales guidance, citing product missteps at Old Navy rather than broader consumer weakness. “It’s not a consumer issue,” CEO Richard Dickson told CNBC at the time. “When you have the right product at the right price value equation, customers are there.” Analysts remain optimistic: nearly half rate the stock a buy or strong buy, with almost 20% upside to the average price target.

GAP YTD mountain Gap year to date

Host Hotels & Resorts (HST), a real estate investment trust owning luxury and upper-upscale hotels globally, yields 3.56%. Second-quarter adjusted funds from operations and revenue both beat estimates, prompting management to raise full-year adjusted FFO guidance. “We are encouraged by the durability of demand across our portfolio, as affluent consumers continue to prioritize travel and group demand remains healthy,” CEO James Risoleo said in the earnings release. The stock has climbed about 27% year to date, and analysts rate it a buy with 11% upside to the average price target.

HST YTD mountain Host Hotels & Resorts year to date

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