UBS likes these high-quality stocks — and they pay dividends

CNBC

11-07-2025

Dividend stocks can be a good way to earn income, but investors shouldn't sacrifice quality when searching for yield. UBS has compiled a list of stocks, using quantitative models and fundamental analysis, that not only pay dividends but are also high quality. Those names make up its UBS Global Quality Dividend Payers Index. The firm recently forecasted 7.2% dividend growth over the next 12 months in the United States, the largest increase in its global coverage. The probability of a dividend cut in the U.S. is 4.5%, making it the safest region for dividends, analyst Amanda Belcaid said in a note earlier this month. To find stocks that it believes are high quality, UBS first does a "rigorous" quantitative assessment of each company by using machine-learning algorithms, she explained. "We want stocks with a high-quality dividend stream, as well as the earnings power and balance sheet to support it," Belcaid wrote. "We also quantitatively assess the potential for the name to outperform its sector." Then, fundamental analysts assess the best-scoring names. Once that process is complete, an algorithm sorts through the stocks to make sure the list is diverse by sector and region. Here are some of the U.S. names on UBS' global index. Dick's Sporting Goods ' 2.26% dividend pays investors to wait for the stock price to improve. The sporting goods retailer has a total return of nearly -7% year to date. When the company reported its quarterly financial results in May, it said it was standing by its full-year guidance amid uncertainty around tariffs. Dick's said it anticipates earnings between $13.80 and $14.40 per share in fiscal 2025 and revenue between $13.6 billion and $13.9 billion. Both are in line with the LSEG consensus estimates. DKS YTD mountain Dick's Sporting Goods The retailer also said in May it will acquire rival FootLocker for $2.4 billion . In addition, it has garnered some attention with its foray into youth sports through its GameChanger app , which can be used to stream games, follow team schedules, and see statistics and scores. The stock has an average rating of buy from the analysts covering it and 19.5% upside to the average analyst price target, according to FactSet. Another consumer discretionary stock on the list is McDonald's , which yields 2.37% and has a total return of about 4% year to date. The fast-food giant had mixed results for its first quarter, with U.S. same-store sales tumbling 3.6% — the worst drop since the start of the Covid pandemic. Still, analysts are positive on the stock, which has an average rating of overweight and nearly 11% upside to the average price target, per FactSet. Goldman Sachs' Christine Cho is one of those who is bullish, upgrading the stock to buy from neutral on Thursday. MCD YTD mountain McDonald's year to date "We believe MCD ultimately has the scale/marketing/digital advantage to successfully navigate through this environment," she wrote in a note. "Management has firmly committed to market share gains through product and marketing innovation (including return of snack wraps, addition of daily double burger to the McValue platform in the US), and we think this could drive a reversal to positive comp trends." Meanwhile, Bank of America recently boosted its dividend by 8% to 28 cents per share after passing the latest stress test by the Federal Reserve , which measures banks' financial health in the event of an economic turndown. The bank, which yields 2.21%, is set to report quarterly earnings next week. It is up 7% so far this year. Shares of Merck , on the other hand, are down 16% year to date. The drugmaker has faced some challenges this year, including concerns over tariffs. Merck lowered its full-year profit guidance in late April, citing $200 million in estimated costs from tariffs and a charge related to its license agreement with Hengrui Pharma in March. Earlier this week, President Donald Trump again threatened to slap the industry with tariffs up to 200% "very soon." MRK YTD mountain Merck year to date The stock has an average analyst rating of overweight and 24% upside to the average price target, according to FactSet. It has a 3.86% dividend yield. Lastly, data-center company Equinix has a 2.47% dividend yield and has lost 19% year to date. Shares of the real estate investment trust took a hit after the company gave long-term guidance during its investor day in late June that disappointed investors. Still, the stock has an average analyst rating of overweight and 28.5% upside to the average price target, per FactSet. Guggenheim's Joseph Oshais is among those positive on the company. He initiated coverage of the stock on Thursday with a buy rating, saying the recent decline has provided an attractive buying opportunity.