With the second quarter officially underway and the S&P 500 trading right back to the top of a trading range that has been in place since the fall, the question is what investors should do now. Many have moved cash to insured money markets for safety and to capture the highest yields in years. For those who think the current rally can continue through the upcoming first-quarter earnings reports, it makes sense to see what top analysts on Wall Street prefer now.
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A new Goldman Sachs report focuses on stocks with solid free-cash-flow generation and cash return on capital invested, which is a cash-flow-based analysis that, by making a series of economic adjustments to traditional accounting data, aims to make nonfinancial companies comparable, regardless of industry or domicile.

In addition, the analysts screened for companies with margin expansion and sales and earnings growth potential, for stocks that are out of consensus favor, and for value and dividend growth potential. We screened the stocks in these various categories, all of which are Buy rated at Goldman Sachs, looking for those that paid the highest dividends. The following seven for investors to consider hit our screens.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. Altria posted strong fourth-quarter results and also announced a shareholder-friendly $1 billion stock buyback plan.

Investors receive an 8.43% dividend. Goldman Sachs has a $52 target price on Altria stock. The consensus target is $49.63, and shares closed on Friday at $44.62.

Amgen

This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.
Amgen’s products include the following:

• Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
• Neulasta reduces the chance of infection due a low white blood cell count in patients with cancer
• Prolia to treat postmenopausal women with osteoporosis

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• Xgeva for skeletal-related events prevention
• Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
• Aranesp to treat a lower-than-normal number of red blood cells and anemia
• Kyprolis to treat patients with relapsed or refractory multiple myeloma
• Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization

Shareholders receive a 3.52% dividend. Goldman Sachs has set its target price at $290, well above the $258.29 consensus target. Amgen stock closed on Friday at $241.75.

Constellation Brands

If any company has products that stay in style, it is this one, and the Goldman Sachs team thinks this is a solid value play when compared to peers. Constellation Brands Inc. (NYSE: STZ) is a leading global producer and marketer of beverage alcohol. Its wide-ranging portfolio spans wine, spirits and imported beer.

The company is one of the world’s largest wine companies overall and is the largest global premium wine company. Key brands include Robert Mondavi, Clos du Bois, Blackstone, Arbor Mist, Black Velvet and SVEDKA vodka. It also owns 100% of the rights to brew, market and sell Modelo’s Mexican beers in the United States.

The company made a gigantic $3.8 billion investment in cannabis company Canopy Growth in 2018 to increase its holdings in the company. The record investment reflects a world in which marijuana has become ubiquitous as its counterculture stigma fades and more states legalize use.

Constellation Brands stock comes with a 1.42% dividend. The $264 Goldman Sachs price target compares with a $254.27 consensus target and the most recent close at $225.89.

FedEx

Given the huge increase in internet shopping and sales, the delivery giant has a strong path for growth. FedEx Corp. (NYSE: FDX) provides transportation, e-commerce and business services in the United States and internationally.

Its FedEx Express segment offers express transportation, small-package ground delivery and freight transportation services; time-critical transportation services; and cross-border enablement, technology and e-commerce transportation solutions. The FedEx Ground segment provides day-certain delivery services to businesses and residences. And the FedEx Freight segment offers less-than-truckload freight transportation services. As of May 31, 2022, this segment had approximately 30,000 vehicles and 400 service centers.
The FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection and back-office support services. The Corporate, Other and Eliminations segment offers integrated supply chain management solutions, specialty transportation, customs brokerage and global ocean and air freight forwarding services. It offers document and business services, as well as retail access to its customers for its package transportation businesses.
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The dividend yield here is 2.01%. FedEx stock is on the Goldman Sachs Conviction List of top picks. The firm’s price target is $250, while the consensus target is $239.81 and Friday’s close was at $228.49.

Johnson Controls

This off-the-radar stock offers the potential for good dividend growth potential. Johnson Controls International plc (NYSE: JCI) together with its subsidiaries, engages in engineering, manufacturing, commissioning, and retrofitting building products and systems in the United States, Europe, the Asia Pacific, and internationally.

It operates in four segments: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia Pacific, and Global Products. The company designs, sells, installs, and services heating, ventilating, air conditioning, controls, building management, refrigeration, integrated electronic security, integrated fire detection and suppression systems, and fire protection and security products for commercial, industrial, retail, small business, institutional, and governmental customers.

Johnson Controls also provides energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems, as well as data-driven smart building solutions to non-residential building and industrial applications. In addition, the company offers control software and software services for residential and commercial applications.

Johnson Controls International stock investors receive a 2.39% dividend. The Goldman Sachs price target is $81. The consensus target is $72.11, and shares closed on Friday at $60.22.

Merck

This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) operates as a health care company worldwide through the following two segments.

The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular and diabetes, as well as vaccine products, such as preventive pediatric, adolescent and adult vaccines.

The Animal Health segment discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as digitally connected identification, traceability and monitoring products.
Merck serves drug wholesalers and retailers, hospitals and government agencies as well as managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. It also serves physicians and physician distributors, veterinarians and animal producers. The company has collaborations with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics and Gilead Sciences.
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Shareholders receive a 2.74% dividend. The top health care play on the Goldman Sachs Conviction List has a $122 target price. Merck stock has a consensus target of $118.71. Friday’s closing print of $106.39.

Tapestry

This retail idea offers some serious total return upside potential as a contrarian play. Tapestry Inc. (NYSE: TPR) provides luxury accessories and branded lifestyle products in the United States, Japan, China and elsewhere. The company operates in three segments: Coach, Kate Spade and Stuart Weitzman.

The company offers women’s accessories, including handbags, such as wallets, money pieces, wristlets and cosmetic cases; novelty accessories comprising address books, time management and travel accessories, sketchbooks and portfolios; and key rings and charms.

Tapestry also provides bag collections, including business cases, computer bags, messenger-style bags, backpacks, and totes; small leather goods, such as wallets, card cases, travel organizers and belts; and footwear, watches, fragrances, sunglasses, novelty accessories and ready-to-wear for men. In addition, it offers women’s footwear; sunglasses; bracelets, necklaces, rings and earrings; fragrances and watches; women’s seasonal lifestyle apparel collections, including outerwear and ready-to-wear; and cold weather accessories, which comprise gloves, scarves and hats.

Further, the company provides footwear items, housewares and home accessories for kids, such as fashion bedding and tableware, as well as stationery and gifts. It licenses rights to market and distribute its tech and soft accessories, jewelry, watches, eyewear and fragrances under the Coach brand, and tableware and housewares, fashion beddings, tech accessories, watches, sleepwear, eyewear, stationery and gifts and fragrances under the Kate Spade brand.

As of July 2, 2022, the company operated through a network of 945 Coach stores, 398 Kate Spade stores and 100 Stuart Weitzman stores. It sells its products through e-commerce sites, concession shop-in-shops and wholesale customers, as well as through independent third-party distributors.

Investors receive a 2.85% dividend. The Goldman Sachs target price of $50 is near the $50.59 consensus target. Tapestry stock closed at $43.11 on Friday.

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These seven top companies, for a variety of reasons, are among the best ideas from the analysts at Goldman Sachs. They all make sense for growth and income investors looking for stocks that still offer reasonable entry points. With first-quarter earnings reporting starting in earnest soon, it may make sense to buy partial positions now and see how the results come in.

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