Bank of America’s U.S. Regime Indicator confirmed a robust recovery phase for the United States economy, advancing for the second consecutive month in August. This significant shift, highlighted by strategist Savita Subramanian, signals a revitalized investment landscape where dividend-paying stocks are poised for strategic importance.
The indicator, which synthesizes economic and corporate data, has navigated periods of volatility since 2022. Its recent consistent upward trend suggests a clearer, more stable economic outlook, influencing a pivot towards income and growth opportunities. Historically, economic recoveries have seen high-dividend stocks outperform the equal-weighted S&P 500, delivering an additional 4.5% to 5.6% return in past cycles. Subramanian emphasizes that dividends are expected to contribute more to total returns now than during the decade of near-zero interest rates. However, investors are advised against chasing excessively high yields, which can indicate underlying company weakness. The S&P 500 currently yields 1.18%.
Strategic Dividend Stock Selection
Bank of America’s methodology for identifying optimal dividend opportunities involves screening Russell 1000 companies based on their 12-month dividend yield. The focus is on the second quintile—companies offering above-average yields without reaching the highest extremes. This strategy mitigates risk by avoiding firms whose high yields might be a result of significant price declines or precede potential dividend cuts, aligning with a disciplined “buy low, sell high” approach.
Featured Dividend Stocks for Strategic Portfolios
Bank of America’s research highlights several companies as attractive options to capitalize on the economic recovery:
| Company | Sector | Dividend Yield | YTD Performance |
| Regions Financial (RF) | Financials | 3.92% | +15.65% |
| Molson Coors Beverage (TAP) | Consumer Staples | 3.83% | -15.65% |
| AvalonBay Communities (AVB) | Real Estate | 3.56% | -10.84% |
| Phillips 66 (PSX) | Energy | 3.62% | +15.15% |
| Olin (OLN) | Materials | 2.97% | -21.24% |
| Exelon (EXC) | Utilities | 3.68% | +14.98% |
| American Tower (AMT) | Real Estate | 3.38% | +6.98% |
| Philip Morris International (PM) | Consumer Staples | 3.22% | +37.75% |
| Fifth Third Bancorp (FITB) | Financials | 3.27% | +7.79% |
| Amgen (AMGN) | Healthcare | 3.37% | +6.47% |
Spotlight on Key Selections
- Regions Financial (RF): This regional bank, operating across the U.S. South and Midwest, rose nearly 16% year-to-date. With an ‘Overweight’ rating, D.A. Davidson highlights its competitive advantages, superior Return on Tangible Common Equity (ROTCE), and four years of robust performance.
- AvalonBay Communities (AVB): A Real Estate Investment Trust (REIT) with a 3.57% dividend, AvalonBay has seen an 11% year-to-date decline but carries an ‘Overweight’ rating with 12% upside potential. It focuses on developing and managing residential communities.
- Exelon (EXC): This utility company, with a 3.68% yield, gained almost 15% year-to-date. CEO Calvin Butler noted serving 17 gigawatts of data center clients and plans to add 16 gigawatts more by year-end, signaling strategic growth in a critical sector.
- Amgen (AMGN): The biotechnology giant, yielding 3.37% and up 6% year-to-date, announced over $600 million for a new California research center. Since 2017, Amgen has invested nearly $5 billion in U.S. projects, strengthening its domestic footprint amid ongoing trade tensions from tariffs previously implemented by the Trump administration.
Lucas turns raw market data into actionable strategies, spotting trends in a heartbeat. With 9 years managing portfolios, he treats market volatility like a surfer riding big waves—balance and timing are everything. On weekends, Lucas hosts “Bull & Bear Banter” podcasts, showing that finance discussions can be as entertaining as they are informative.