BMO: These 42 dividend stocks will provide strong income growth as inflation continues to run hotter than expected

  • Higher-than-expected inflation has caused many Wall Street strategists to recalculate.
  • Brian Belski, the top strategist at BMO Capital Markets, just cut his S&P 500 price target.
  • Here are 42 stocks to consider for strong dividend growth as prices continue to surge.

The biggest surprise in markets this year is just how persistent inflation has been. Central banks like the Federal Reserve were certainly caught flatfooted, as were Wall Street strategists — especially bullish ones like Brian Belski, the chief investment strategist at BMO Capital Markets.

For most of this year, Belski had the highest S&P 500 price target on the Street. But Belski no longer holds the title of biggest bull after he cut his target for the second time this year on Thursday. The revision came after September’s inflation report came in hotter than expected.

“What has changed? The simple answer is the inflation environment, which we underestimated with our previous forecast,” Belski wrote in an October 13 note announcing the new price target.

Although Belski expects inflation reports to remain hot, he’s still bullish. His revised S&P 500 target implies that the index will rise by a “more realistic” 19% in the fourth quarter to finish the year at 4,300. That would make a 10% loss after the index was down nearly 27%.

“Although we have tempered our enthusiasm, we truly believe that stocks can and should rebound from current levels,” Belski wrote. “The one caveat is that future trajectory is likely to follow more normalized patterns, a sharp departure from the pandemic stimulus-fueled gains of 2020-21 and the resulting YTD losses that unwound much of that excess.”

Focus on 42 stocks with solid dividend growth as inflation runs rampant

Belski and his colleagues at BMO Capital Markets have nine investing strategy portfolios that can serve as models for investors. One such portfolio is the US dividend growth portfolio, which was down 5.5% in the third quarter and lagged the S&P 500 by 0.65% in that span but is still outperforming the index by 6% on the year, according to the firm. The portfolio yields 3.4%.

Below are the 42 stocks that are currently in the US dividend growth portfolio along with the ticker, sector, dividend yield as of October 10, and rating from BMO analysts for each.

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