The Federal Reserve cut interest rates three times last year. On the surface, this might look good for stock bulls and bad for savers. But you can turn the Fed's war on income investors around with the top dividend stocks to buy in 2020.
And we're going to show three with yields over 6% today.
For perspective, we saw bond prices fall to record lows in 2019. Treasury yields started the year just under 3% and finished well below 2%. So not only can investors use dividend stocks to make up for lost bond income, they can actually multiply it three-fold or more with dividend stocks.
But these top dividend stocks aren't just paying rock-solid dividends. Because the Fed's dovish moves have pumped the stock market, these dividend stocks are also solid 2020 growth stocks.
We're talking about firms that operate industries where demand will remain high despite concerns about the economy. These firms also put a heavy emphasis on returning capital to their investors.
So here's our first top dividend stock, with both a strong dividend and great upside.
Top Dividend Stocks to Buy No. 3: Brigham Minerals
Brigham Minerals Inc. (NASDAQ: MNRL) is one of the companies best-poised to capitalize on an oil revolution in the United States. And that makes it one of the best dividend stocks trading now.
U.S.-China trade war concerns held back oil prices last year. But in 2020, as OPEC moves to cut production and the United States moves to sign a phase one deal with China, oil prices will tick higher.
That uptick is good news for U.S. oil producers. The country exported more oil and oil products in September 2019 than it imported for the first time since World War II.
Brigham Minerals has ample acreage to expand production or divest land assets at a higher price. The company aims to acquire oil and gas mineral rights across shale basins in the United States. Its unconventional holdings are located in places like the Bakken and Three Forks in North Dakota, SCOOP and STACK plays in Oklahoma, and the DJ Basin in Colorado.
In the year ahead, the firm's counterparty producers may expand production by more than 25%, according to analysts at RBC Capital. That would turn the firm into a cash machine and potentially bolster prices and the dividend higher. The stock currently trades at $21.44 per share and holds a dividend of 6.16%. This presents a solid buying opportunity that could return investors a huge gain in 2020.
The share price could climb up to $28 over the next 12 months. That figure would represent an upside of 30.5% from 2019's closing price.
6% is fantastic. But our next dividend stock serves up an even higher yield...
Top Dividend Stocks to Buy No. 2: RLJ Lodging Trust
RLJ Lodging Trust (NYSE: RLJ) is a business-focused hospitality real estate investment trust (REIT) with more than 122 properties. The company owns mid-tier properties for popular hotel chains like Marriott's Renaissance and Courtyard, Hyatt Place, and Hilton's Embassy Suites, Garden Inn, and Homewood Suites.
It has a portfolio of more than 20,100 rooms, located in 21 states and the District of Columbia. And it's a cash-flow machine. The REIT trades at $17.72 per unit. But it also has a dividend of 7.45%.
We expect that the business hospitality space will be a very successful part of the REIT space in 2020. Therefore, we see RLJ units trading at or above $20 by the end of the year. That price target represents a potential upside of 12.8%. And that would also represent a total return above 20%.
Both of these are tremendous dividend stocks with good upside potential. But this next dividend stock is probably the best bet for conservative investors wanting fixed income for decades.
Top Dividend Stocks to Buy No. 1
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You know that markets are irrational when you look at the current state of the U.S. auto industry. Ford Motor Co. (NYSE: F) is one of the world's largest automotive companies in the world with a market capitalization of nearly $37 billion. It continues to crank out vehicles year-in and year-out to steady demand across the globe.
Meanwhile, Tesla Inc. (NASDAQ: TSLA) doesn't pay a dividend and constantly struggles to meet deliveries. It operates under the direction of an erratic CEO and faces government traffic investigations. Ford, in contrast, has been reliably cranking out cars and shareholder returns for decades. That sets Ford apart from the broader auto industry right now.
That makes Ford's dividend yield of 6.45% and a better upside heading into 2020 a steal right now.
We have a price target of $12 for Ford, a figure driven by real fundamentals, not the hopes and whims of speculators passing the TSLA bag to unknowing investors. That Ford price target represents an upside of 29% over 12 months.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.