Bank of America flags high-free-cash-flow dividend stocks as valuations stay stretched

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Highlights

Bank of America highlights non-AI high-free-cash-flow dividend stocks like Allstate (18% free-cash-flow yield, up 17% YTD) as S&P 500 valuations stay high.
Amazon, Alphabet, Meta Platforms, Microsoft, and Oracle are projected to generate negative free cash flow of $141 billion combined over the next 12 months.
Allstate, Cigna (24% implied upside), and Hasbro (25% upside, Magic: The Gathering quarterly revenue > $500 million) offer cash generation and dividend support versus AI-focused peers.

Free-cash-flow screen highlights non-AI names

As reported by CNBC, Bank of America strategist Jared Woodard says free cash flow yield is the bank’s preferred measure of quality because it is harder to manipulate and easier to compare across companies. In a Sept. 9 note, he says companies that produce steady cash are rewarded because they can invest for growth, reduce debt and return capital to shareholders when needed.

Woodard says free-cash-flow yield in the S&P 500 is at record lows as large technology companies spend billions and take on debt to maintain artificial intelligence positions. He notes that Amazon, Alphabet, Meta Platforms, Microsoft and Oracle are expected to generate negative free cash flow of $141 billion combined over the next 12 months, while high-free-cash-flow stocks are up 43% year to date.

Among the non-AI stocks that Bank of America rates buy, Allstate stands out with an 18% free-cash-flow yield. The insurer yields about 1.8%, is up roughly 17% year to date, and reports second-quarter adjusted earnings of $8.99 per share in August, ahead of the $6.06 expected by analysts surveyed by FactSet.

Cigna also appears on the list, with FactSet data showing an average overweight rating from analysts and implied upside of 24% based on consensus price targets. In July, the company posts second-quarter earnings and revenue above expectations and raises full-year adjusted earnings guidance to $30.45 per share from $30.35, while the stock is down slightly this year and yields 2.3%.

Hasbro rounds out the dividend-paying names cited, carrying an average buy rating and about 25% upside to the average target price, according to FactSet. The toymaker says July second-quarter results beat expectations, with growth led by Magic: The Gathering, whose quarterly revenue rises above $500 million for the first time in the brand’s more than 30-year history.

Income appeal grows as market valuations remain high

The screen reflects a more defensive approach for investors seeking income and balance-sheet strength while the broader market remains expensive. Bank of America’s argument is that scarce free cash flow becomes more valuable when major growth companies are consuming capital rather than producing it.

That setup may also appeal to investors looking for dividend support while waiting for a recovery in underperforming shares. For Allstate, Cigna and Hasbro, the combination of cash generation, dividend income and analyst-implied upside gives the stocks a different investment case from the dominant AI trade that continues to drive parts of the U.S. market.

In our earlier article on the Forbes 400’s 2026 ranking, we noted that the entry cutoff hit a record $4.4 billion and that the list of the youngest U.S. billionaires skewed heavily toward AI founders. The piece highlighted how AI ventures—alongside a smaller set of fintech and defense-tech names—are increasingly shaping new wealth creation, with inheritance the exception rather than the rule.

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