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As the economy slows down, investors will want to play defense with dividend strategies, according to Wolfe Research. Yet not all dividend stocks are created equal. While they offer stability and income during times of economic uncertainty, some companies may feel compelled to cut their payouts if times get too tough. “In a later cycle environment, dividend growth becomes scarce and investors tend to pay up for companies with high dividend growth,” analyst Chris Senyek wrote in a note last week. Therefore, the strategy is to look for names with both high dividend growth and a high free cash flow yield, since investors look to cash flow to support further dividend growth, he said. “Historically, this cohort of stocks has outperformed by 500+ basis points annually,” Senyek said. “Additionally, this combination performs very well in later cycle/recessionary environments.” One basis point is equal to one one-hundredth of a percent. Here are 10 names that made the cut. Comcast posted an earnings beat in July for its second quarter as higher pricing offset the slowdown in its broadband business. Its streaming service, Peacock, saw its subscriber base nearly double to 24 million versus the year prior, while its revenue climbed 85% to $820 million. The results led Morgan Stanley analyst Benjamin Swinburne to declare the quarter “has put new life” into the stock. “With equity appreciation comes higher expectations, but valuation remains depressed and with business stability cable should continue to act as a safe haven in a rocky Telco/Media market,” he wrote in an Aug. 15 note. Comcast has an average analyst rating of overweight and has nearly 10% upside to the average price target, according to FactSet. Lennar is also well-liked by analysts, with an average rating of overweight and about 20% upside to the average price target, per FactSet. The homebuilder’s stock has rallied this year, spurred by the shortage of houses for sale. Lennar, which is expected to post earnings later this month, was among the homebuilder stocks upgraded by Raymond James in July. The Wall Street firm said it belatedly realized the magnitude of pent-up demand for single-family homes. “Combining targeted price reductions, incentives, and mortgage rate buydowns to keep home production flowing, despite mortgage rate volatility, Lennar has been able to identify the remarkable reservoir of pent-up housing demand much sooner than most,” wrote analyst Buck Horne. He also noted there were potential risks in the back half of the year, including high mortgage rates. UnitedHealth also made Wolfe’s list. The health-care giant topped expectations for both the top and bottom lines when it reported quarterly results in July . UnitedHealth also raised the lower end of its full-year guidance. Shortly after that earnings beat, Bernstein upgraded the stock to outperform from market perform and boosted his price target by $8 to $603, which implies 25% upside from Tuesday’s close. “Current valuation offers a unique opportunity to buy a piece of a business with a large runway of growth in front of it at very attractive valuation,” analyst Lance Wilkes wrote in a note to clients. — CNBC’s Michael Bloom contributed reporting. Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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