Goldman Sachs names global stocks with sustainable dividend yields — and says one will hit 10%

European companies are more cash-rich than they’ve been in recent history. Companies in the Stoxx 600 index have nearly 1.5 trillion euros ($1.6 trillion) in cash on their balance sheets — that’s 25% higher than pre-pandemic levels, according to Goldman Sachs. The free cash flow yield in Europe is around 6% — more than one percentage point above that of the United States, the bank said. According to Goldman, sectors with the highest yield include autos, commodity producers and financials. The bank favors the latter two, given their clearly stated focus on shareholder returns. Overall, the company balance sheets in the region are particularly strong, with the level of net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) close to an all-time low, the bank said in an April 23 note. The dividend yield differential between Europe and the U.S. is the narrowest it’s ever been, making Europe more appealing, according to Goldman Sachs. “In other words, Europe has rarely looked cheaper on an absolute and relative basis,” it said. “We think dividends can continue to grow in Europe given that payout ratios are below the historical average … and investment opportunities remain scarce,” the bank said, adding that it expects European dividends to grow around 3% in 2024 and 4% in 2025. Goldman said there are also good opportunities in value stocks right now, particularly in banks and energy. The MSCI Europe Value index offers a dividend yield of 4.8% — 2.8 times that of the MSCI Europe Growth. Goldman added that the volatility surrounding rates now suggests that value stocks should continue to outperform growth equities. “In this environment, we think investors should also focus on stable income strategies as income is likely to become an important driver of returns,” it said. Here are some stocks in Goldman’s screen of high dividend yield names. They are companies in the Stoxx Europe 600 with the highest 12-month forward dividend yields in each sector. The bank stressed that this screen identifies companies with the highest sustainable dividend yields. — CNBC’s Michael Bloom contributed to this report.