Needless to say, over the last three years, the Artificial Intelligence explosion has been at the top of almost every investor’s mind. Many have become wealthy, as stocks like NVIDIA and other top tech names soared in a rally some feel is reminiscent of the late 1990s dot-com boom and bust. Between billions being spent on capital expenditures related to AI, the circular financing that seems to shovel money between the top companies in the industry, the worries over depreciation being used in accounting, and off-balance sheet financing, concerns over an AI bubble are legitimate and need to be addressed.
However, some top corporate executives are beginning to integrate robust AI systems into their operations and could be ready to demonstrate significant savings sooner rather than later. The team at Goldman Sachs profiled companies that have mentioned AI in earnings reports regarding productivity enhancement. This was noted in the Goldman Sachs research.
With the AI trade potentially transitioning to another phase, Ryan Hammond provides a list of what we call Phase 4 AI trade stocks, featuring characteristics that suggest the underlying companies could be ripe for margin-enhancing AI initiatives. Focus on: companies with high labor costs (you need room to improve); high exposure to AI automation (you need to be open to incorporating technology); and those that have already discussed AI in the context of productivity (we prefer companies that are heading down the path already, not sometime in the future).
Goldman Sachs highlighted AI productivity beneficiaries: Stocks with a combination of high labor costs and high exposure to AI automation that have discussed AI in the context of productivity. They compiled a list of Russell 1000 companies that check all the boxes, and we found five strong buys now. All pay dividends and could be great ideas for growth and income investors looking ahead. All are rated Buy at the top Wall Street firms we cover.
Franklin Resources
Franklin Resources, Inc. (NYSE: BEN) is among the most prominent global money managers. The firm markets mutual funds and institutional separate accounts under the Franklin, Templeton, and Mutual Series brands and pays a solid 5.81% dividend. At times, 50% of its sales are from outside the US, an advantage given the maturing US market.
Franklin Resources offers its products and services under the brands of:
- Franklin
- Templeton
- Franklin Mutual Series
- Franklin Bissett
- Fiduciary Trust
- Darby
- Balanced Equity Management
- K2
- LibertyShares
- Edinburgh Partners
The 2023-2025 bull market was a strong tailwind for the company; however, the recent sell-off has made the shares appear incredibly cheap. While withdrawals from baby boomers may be a concern, the path forward in 2026 also appears solid, as the shares have rebounded from their April lows.
Goldman Sachs has a Buy rating with a $29 target price.
Fidelity National Information Services
This financial giant offers investors a dependable 2.42% dividend and excellent upside potential. Fidelity National Information Services Inc. (NYSE: FIS) is a financial technology company providing solutions to financial institutions, businesses, and developers.
The Company’s segments include:
- Banking Solutions
- Capital Market Solutions
- Corporate and Other
The Banking segment is focused on serving financial institutions with core processing software, transaction processing software, and complementary applications and services, many of which interact directly with core processing software. The Company sells these solutions on either a bundled or stand-alone basis.
The Capital Markets segment is focused on serving global financial services clients and corporations with an array of buy- and sell-side, treasury, risk management, and lending solutions. Its solutions include a variety of mission-critical buy- and sell-side applications for recordkeeping, data and analytics, trading and financing, and corporate treasury and risk management.
UBS has a Buy rating with a $83 target price.
H & R Block
Everybody knows the legacy tax preparation company, which also pays a solid 3.73% dividend. H & R Block Inc. (NYSE: HRB) provides tax preparation services, financial products, and small business solutions.
The Company provides assisted and do-it-yourself tax preparation solutions through multiple channels (including in-person, online, and mobile applications, virtual, and desktop software) and distributes H&R Block-branded services and products. It also offers small business solutions through its Company-owned and franchise offices (including in-person, online, and virtual) and online through Wave.
H & R Block provides additional services, including:
- Refund Transfers
- Peace of Mind Extended Service Plan
- H&R Block Emerald Prepaid Mastercard
- Spruce
- H&R Block Emerald Advance term loans
- Tax Identity Shield
- Refund Advances
- Small business financial solutions
For its Canadian clients, the Company also offers POM, H&R Block’s Instant Refund, H&R Block Pay With Refund, and small business financial solutions.
Barrington Research has an Outperform rating with a $62 target price.
International Business Machines
International Business Machines, nicknamed Big Blue, is an American multinational technology company. The legacy blue-chip tech giant offers conservative investors a safer way to play the sector, is up a stunning 35% in 2025, and pays a 2.20% dividend. International Business Machines Corporation (NYSE: IBM) and its subsidiaries provide integrated solutions and services worldwide.
The company operates through four segments:
- Software
- Consulting
- Infrastructure
- Financing
The Software segment offers a hybrid cloud and AI platform that allows clients to realize their digital and AI transformations across the applications, data, and environments they operate. IBM has partnered with Amazon Web Services (AWS) to allow users to access Watsonx AI features and its data platform. IBM also partnered with Palo Alto Networks, allowing the cybersecurity company to acquire IBM’s QRadar Software as a Service (SaaS) assets.
The Consulting segment focuses on integrating skills across strategy, experience, technology, and operations by domain and industry.
The Infrastructure segment provides on-premises and cloud-based server and storage solutions, as well as life-cycle services, for hybrid cloud infrastructure deployments.
The Financing segment offers client and commercial financing that facilitates IBM clients’ acquisition of hardware, software, and services.
The company has a strategic partnership with various companies, including:
- Hyperscalers
- Service providers
- Global system integrators
- Software and hardware vendors that include Adobe, Amazon Web Services, Microsoft, Oracle, Salesforce, Samsung Electronics, SAP, and others.
Stifel has a Buy rating with a $295 price target.
U.S. Bancorp
Based in Minneapolis, this Super-Regional financial giant is an outstanding choice for growth and income investors now, offering a hefty 4.23% dividend. U.S. Bancorp (NYSE: USB) is a financial services holding company.
The bank’s segments are:
- Wealth
- Corporate
- Commercial and Institutional Banking
- Consumer and Business Banking
- Payment Services
- Treasury and Corporate Support
It offers a comprehensive range of financial services, including lending and deposit services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and ATM processing, mortgage banking, insurance, brokerage, and leasing.
The company’s banking subsidiary, U.S. Bank National Association (USBNA), is engaged in the banking business, principally in domestic markets. USBNA provides a range of products and services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions. I
The non-banking subsidiaries offer investment and insurance products to customers primarily within their domestic markets, as well as fund administration services to a range of mutual and other funds.
Citigroup has assigned a Buy rating with a target price of $70.