Investors preparing for an economic downturn can expect dividend-paying names to shine, and Wolfe Research highlighted a few names that are worth buying. Recessionary worries are back in focus after Federal Reserve Chair Jerome Powell warned last week that the central bank is “prepared to raise rates further if appropriate.” His remarks were made at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming . “This is likely to put downward pressure on stocks, particularly the ‘Big 7′ tech names and other longer duration assets,” Wolfe noted in its Monday report. “In this environment, we expect defensive names, such as dividend strategies to outperform.” In particular, the firm recommended buying stocks that offer the second-highest quintile yield, a group that has historically outperformed the names in the top quintile with respect to yield. “This is even more important in a slowing economy as investors worry about potential dividend cuts from the highest yielders,” Wolfe wrote. See below for 10 names that made the firm’s cut. CenterPoint Energy popped up on Wolfe’s list, even as the overall energy sector is negative for the year. The stock yields 2.7%. In July, CenterPoint posted second-quarter adjusted earnings of 28 cents per share on revenue of $1.88 billion. The company narrowly beat analysts’ expectations of 27 cents per share in earnings and revenue of $1.87 billion, per StreetAccount. In all, 10 out of 16 analysts covering CenterPoint rate it a buy or a strong buy, according to Refinitiv. Wall Street anticipates upside of 16%, based on the average price target. Select tech names also fit the bill. Skyworks Solutions , which pays a dividend yield of about 2.5%, is on Wolfe’s list. Earlier this month, Harsh Kumar of Piper Sandler hiked his price target on the semiconductor stock to $125 per share from $107. The analyst pointed to “Solid execution while managing down excess inventory across Android customers.” For its fiscal third quarter , Skyworks reported adjusted earnings of $1.73 per share, while analysts called for $1.67 per share, per FactSet. The company also boosted its quarterly dividend by 10% to 68 cents per share. About 44% of the analysts covering the stock rate it a buy or a strong buy, according to Refinitiv. The average price target on Skyworks anticipates upside of 12%. Finally, fast-food staple McDonald’s made the grade. The stock pays a 2.1% dividend yield. Most recently, the company cruised to an earnings beat in the second quarter, buoyed by sales of its Grimace Birthday Meal . Stifel analyst Chris O’Cull hiked his price target on the stock to $315 from $300 after McDonald’s posted its results, noting “few grimaces on another solid print.” About 74% of the analysts covering the stock rate it a buy or a strong buy, per Refinitiv. The average analyst price target calls for upside of 16%. — CNBC’s Michael Bloom contributed to this report.
