Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields. It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer
Assurant Inc. AIZ +0.03% is a specialty insurer offering everything from property coverage to prefunded funeral insurance. Trading in the mid-$30 range, it has the highest potential earnings accretion due to share buybacks at 13.8% and a dividend yield of 2.6%, putting its total at 16.4%, according to Goldman. Target price now is at $45
Paper miller Domtar Corp. UFS -0.73% is second on the total yield list with 15.6% due to a potential 13.5% earnings accretion from share buybacks and 2.1% from dividends. Upside on the mid-$80 stock is roughly 3%,
Validus Holdings Ltd. VR +0.33% is third with 10.6% earnings accretion and a 3.3% dividend yield, for a total combined 13.9% payoff. Based in Hamilton, Bermuda, the reinsurer is trading in the mid-$30 range and has a Goldman price target of $44.
Coca-Cola Enterprises Inc. CCE +0.52% is fourth on the list with a combined 13.7% earnings accretion plus dividend yield. The Atlanta-based bottler of Coca-Cola KO -0.11% is now trading in the low-$30 range and has an upside of about 19%
Offering the top dividend yield of all the companies on the list puts energy firm HollyFrontier Corp. HFC -0.28% in fifth place. HollyFrontier boasts an 8.4% dividend, more than twice that of any other company. But its relatively low 3.5% buyback earnings accretion keeps the total payout at 11.9%. Trading in the low $40s, HollyFrontier also is considered to have the highest price upside of more than 50%, with a target of $69.
Wyndham Worldwide Corp. WYN +1.02% has a potential 11.8% combined earnings accretion and dividend yield, according to Goldman, making it sixth on the list. Trading in the mid-$50 range, the stock’s price target is $62.50.
Home-improvement retailer Lowe’s Cos. LOW +0.33% takes the seventh spot with a total payout of 10.2%. Lowe’s could yield up to 8% in share-buyback earnings accretion, Goldman says.
Marathon Petroleum Corp. MPC +0.88% is the second energy company on the list, and eighth overall with a combined 8.6% share accretion and dividend yield. The company has a relatively large potential share payoff as well, with shares in the $61 range and a price target of $87, for a 36% upside
Ameriprise Financial Inc. AMP +0.58% now is trading in the mid-$60 range, near its price target. But the combined dividend-share accretion yield could reach 8.5% this year, Goldman says, putting it in ninth place. The asset-management company is based in Minneapolis.
Railroad operator and freight hauler Norfolk Southern Corp.NSC +1.41% comes in at 10th, with a combined yield of 8.4%. Goldman says the company should have a dividend yield of 3.3% as well as accretion payoff of 5.2%
Insurer Axis Capital Holdings Ltd. AXS +1.46% is 11th, with a combined yield of 8.2%. Based in Pembroke, Bermuda, it offers everything from catastrophic insurance to medical malpractice, as well as reinsurance to other providers. It also has a 21% potential upside to its price target of $43.
Fifth Third Bancorp FITB +0.07% is tied for 11th at 8.2% in total yield, Goldman says. The Cincinnati-based financial-services firm could see 5.2% earnings accretion from share buybacks, according to the Wall Street firm.
China Applied Materials Inc. AMAT +1.00% concludes the list at No. 13 with a potential 7.8% yield. The chip maker is the only tech firm among the top 13. The Santa Clara, Calif.-based company now is trading between $11 and $12, with a Goldman price target of $13.
