Bank of America says investors looking for income should look to a small number of small-cap stocks that pay high-quality dividends. While the S&P 500 and Nasdaq Composite Index are setting new records, up about 11% year-to-date, the Russell 2000 is no match. In 2024, the increase will be only 2.5%. But don’t let the underperformance of small-cap indexes put you off guard. Jill Carey Hall, an equity strategist at Bank of America, said in a research note Monday that some stocks in the index offer high-quality dividend yields. “For the first time in over 16 years, a greater proportion of Russell 2000 stocks offer a dividend yield above the 10-year Treasury yield (10%) than the S&P 500 (7%),” he said recently. noted that 41% of Russell 2000 stocks offer a dividend. Additionally, if the Fed starts lowering interest rates, the yield paid on cash will fall, making these dividend-paying companies even more attractive in terms of returns. Bank of America has screened the Russell 2000 Index for small-cap dividend paying companies that it rates as Buys and meet the following criteria: High quality: This means the company is profitable and in the bottom three quintiles for five-year earnings volatility. Based on the bank’s dividend rating, the dividend is expected to be stable or increasing. Cheap valuations: These stocks are in the bottom three quintiles based on forward price/earnings ratios. The brands that met the criteria are listed below. Salty snack maker Utz Brands is on the list. Bank of America upgraded the stock from neutral to buy in March. “We have increased confidence in UTZ’s roadmap to achieve a long-term revenue algorithm of 4-5% from Q4 2024 to 2025, and we believe this could lead to both revenue and multiple upside. “There are,” wrote analyst Peter Garbo. He noted that Utz is positioned to gain market share due to the company’s moves to expand its geographic distribution in parts of the West, Midwest, Southwest and Southeast. The company is based in Hanover, Pennsylvania. Utz’s stock price is expected to rise approximately 12% in 2024, with a dividend yield of 1.3%. Fast food chain Jack in the Box also appeared on Bank of America’s list. While stocks are down 34% in 2024, several Wall Street companies are highlighting the opportunity. “We recommend investors take advantage of Jack’s recent sell-off even though same-store sales are expected to surge in the near term,” Loop Capital analyst Alton Stamp said in April. is written in. He blamed a combination of slowing same-store sales and California’s fast-food minimum wage law for the stock’s slump. “However, in our opinion, these perceived headwinds are misplaced,” Stamp said. He recommends this stock as a buy. The dividend on this stock is approximately 3.2%. Finally, Bank of America added Essential Properties Realty Trust to its list of recommended dividend stocks to buy. The real estate investment trust specializes in single-tenant properties, and its portfolio includes car washes, early childhood education centers, and quick-service restaurants. In March, Citi upgraded EPRT from Neutral to Buy. This is due to increased confidence in the company’s acquisition pipeline and leverage below target metrics, which gives the company balance sheet flexibility. “We believe our forecast is achievable given our low leverage and high liquidity, and we expect growth of nearly 6% through 2024, which is faster than most net lease REITs we cover,” Nick said.・Citi’s analyst team led by Joseph wrote: The stock has a dividend yield of 4.2% and the stock price will rise 7.5% in 2024.
Bank of America recommends buying under-the-radar blue-chip dividend stocks
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