High-yield dividend stocks might be the best option for savers in 2020.
Today, U.S. Federal Reserve members will discuss monetary policy and the outlook for interest rates in the coming year. But we already know what they're going to say.
So let me save you a little bit of time...
Interest rates will remain lower for longer. And you can expect further cuts if the economy gets bumpy.
We know this because lower interest rates were the Fed's favorite weapon in its ongoing war on savers.
To be fair, fixed-income investors haven't been able to rely on interest rates for most of the decade anyway. With 2020 underway, it looks like investors are stuck finding other ways to live off their nest egg.
Today, I'm digging into three of my top high-yield dividend stocks right now. That includes what I think is one of the best dividend stocks in 2020. It combines a 5%-plus dividend with significant upside over the next 12 months.
Plus, this first dividend stock plans increase its dividend by 79% each year...
This Stock Pays $1 Per Share
Lower interest rates and ongoing political tensions have been a boon for gold prices. And with gold breaking out of a multiyear holding pattern, gold stocks have once again pushed to recent highs. This has been good for Newmont Corp. (NYSE: NEM).
So this week, the company used the recent uptick as a tool to recruit new investors. The firm announced a plan to increase its dividend by 79% to $1 per share each year.
The firm also plans to boost its share repurchase plan for up to $1 billion in common stock. In 2019, Newmont returned about $1.4 billion to shareholders. In 2020, it will try to increase those allocations, particularly if gold prices continue to climb.
Now, let's pivot to one of the best dividend stocks from last year - it's also ready for a big 2020.
Microsoft Dividend Hike Coming Soon
Microsoft Corp. (NASDAQ: MSFT) emerged as one of the top stocks of 2019. Shares popped more than 54%, nearly doubling the return of the S&P 500 for the year.
The firm has emerged itself in the cash-rich industries of cloud computing and software subscriptions. The uptick in share price naturally impacted the company's dividend.
Over the year, its dividend yield fell from 1.7% to 1.2% since share prices soared. But don't expect it to stay down at 1.2% for very long.
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Markets largely expect that Microsoft will announce a dividend hike during its upcoming earnings report. Over the last five years, MSFT has increased its dividend from $0.31 per quarter to $0.51. Given its 9.5% hike in 2018 and its 11% hike last year, investors could easily see another double-digit percentage increase this year.
Now, our top dividend stock has the highest yield of these, over 5%. But it's also a growth opportunity...
This High-Yield Dividend Stock Could Jump 45%
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There is perhaps no industry more vital to the economy than the chemical industry. Plastics, clothes, fertilizer, furniture, appliances - it all starts with the chemical firms. Still, a lot of investors are walking away from them, calling them unethical or bad for the environment.
Enter The Chemours Co. (NYSE: CC), a chemical giant that spun off from DuPont back in 2015. Chemours is a cash-rich company paying a whopping 5.82% dividend in an industry needed for the economy to sustain growth. But looking at the other numbers - this stock is also ridiculously cheap.
It currently trades at a P/E ratio of just 7.2 times earnings. That figure is way below the industry average of 26 times earnings. The stock also trades at a ridiculous 0.5 times sales, which is very surprising for a chemical firm. The industry average for price to sales is 2.89.
But perhaps the biggest sign that this stock is cheap is its valuation. This stock trades at a level that would make a private equity firm blush. Its enterprise value to EBITDA multiple is sitting at just 7.2. Like I said, incredibly cheap.
Looking forward, investors expect economic growth will expand this year. That said, Wall Street still isn't expecting anything significant out of Chemours. Its projected earnings sit at $3.28 for the year.
But if that is the case, it would be trading at forward earnings under 5.4 times earnings. Income investors could do much worse. You can collect that solid dividend and wait for the industry to recover. CC stock has upside of about $25 a share over the next 12 months, which signals a possible gain of 45%.
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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.