Here's where to find high-quality dividend stocks.
The market outlook for 2020 is much different than the outlook for 2019. Heading into 2019, stock prices were 25% lower and interest rates were 0.75% higher. As investors look for the best stocks to buy for 2020, one of the biggest questions is whether or not the Federal Reserve will cut interest rates further following three rate cuts in 2019. Investors looking for high-quality yield in 2020 have few viable options. With interest rates seemingly stabilizing for now, here are 20 of the best high-yield dividend stocks to buy for 2020, according to Bank of America.
AllianceBernstein Holding (ticker: AB)
AllianceBernstein is a global asset manager structured as a master limited partnership. Analyst Michael Carrier says AllianceBernstein should outperform its asset manager peer group and currently trades at a valuation discount relative to its historical earnings multiple. In the long term, Carrier says AllianceBernstein should experience tailwinds from positive flow trends and lower expenses following its move from Manhattan to Nashville. Bank of America is calling for 2020 earnings per share of $2.87. AllianceBernstein has an 8% yield. Bank of America has a "buy" rating and $34 price target for AB stock.
Bain Capital Specialty Finance (BCSF)
Bain Capital is a specialty finance company structured as a business development company that invests in commercial enterprise debt and equity. Analyst Derek Hewett says Bain's portfolio grew to $2.5 billion in the most recent quarter, beating Bank of America's forecast. However, the company's leverage multiple of 1.6 is currently above its 1 to 1.5 target range, suggesting the balance sheet is stretched to capacity. Bain Capital has an 8.2% yield. Bank of America has a "buy" rating and $19.50 price target for BCSF stock.
Enterprise Partners Products (EPD)
Enterprise Partners Products is the largest public MLP in the world and is a provider of midstream energy services such as gathering, processing and transportation of natural gas liquids. Analyst Ujjwal Pradhan says about $3.1 billion of Enterprise's $9.1 billion project backlog through 2023 is set to go into service within the next six months. Pradhan says Enterprise has an appealing organic growth profile despite a difficult commodity price backdrop. Enterprise Partners has a 6.6% yield. Bank of America has a "buy" rating and $36 price target for EPD stock.
Energy Transfer (ET)
Energy Transfer owns more than 83,000 miles of pipelines and has one of the largest oil and gas transport networks in the U.S. Pradhan says Energy Transfer's fundamentals are solid given the difficult commodity background, and its valuation is cheap after the stock significantly underperformed in the past six months. He says Energy Transfer deserves a premium valuation to its peer group given its appealing growth outlook and its diversified asset portfolio. Energy Transfer has a 10.3% yield. Bank of America has a "buy" rating and $24 price target for ET stock.
Ford Motor Co. (F)
Ford shares have lagged in the past five years after the company was slow to react to an auto industry shift toward electrification, automation and technology. Ford made a bold move in focusing on its higher-margin trucks and cutting many of its sedan models. Analyst John Murphy says Ford's recent commitment to EVs, including its $500 million investment in EV startup Rivian, is a sign that management is going all-in in what some are calling Auto 2.0. Ford pays a 6.6% dividend yield. Bank of America has a "buy" rating and $13 price target for F stock.
Hoegh LNG Partners (HMLP)
Hoegh is a liquefied natural gas shipping company structured as a master limited partnership that owns a fleet of five floating storage and regasification units. Analyst Ken Hoexter is projecting a 9.8% target yield for 2020 and says the company's long-term average charter length and its dividend growth potential are good reasons to buy the stock. Hoexter says 60% of Hoegh's future unit growth potential is located in the Middle East. Hoegh has a yield of 11.4%. Bank of America has a "buy" rating and $18 price target for HMLP stock.
Mobile Telesystems (MBT)
Mobile Telesystems is the largest wireline telecom company in Russia. Analyst Cesar Tiron says his modest 0.9% compound annual revenue growth outlook for Mobile Telesystems over the next three years was not significantly impacted by the recent $734 million divestment of Ukraine assets. In fact, dividend investors who buy before the record date of Jan. 10 will get a special dividend related to the deal that ads an extra 4.3% onto Mobile Telesystems already large 7.6% yield. Bank of America has a "buy" rating and $12 price target for MBT stock.
MPLX is an Ohio-based MLP that specializes in crude oil and natural gas processing and transportation. Pradhan says MPLX is dialing back its capital expenditures in 2020, de-emphasizing its gathering and processing segment and focusing on logistics and storage. Once MPLX's Andeavor Logistics integration is complete, Pradhan says the company will prioritize optimizing its portfolio and potentially unlocking the full value of its midstream assets. The company also has an impressive backlog of growth projects. MPLX has a 10.5% dividend yield. Bank of America has a "buy" rating and $32 price target for MPLX stock.
Plains All American Pipeline (PAA)
Plains is another MLP focused on the midstream crude oil business. Pradhan says Plains beat consensus earnings expectations in the third quarter due in large part to margin improvements and strength in the company's supply and logistics segment. However, he anticipates a ramp in competition in 2020 coupled with only modest Permian production growth could limit near-term upside. In the longer term, Pradhan says he is bullish on the company's fundamentals and its fee growth outlook. Plains has an 8% dividend. Bank of America has a "buy" rating and $23 price target for PAA stock.
Plains GP Holdings (PAGP)
Plains GP is the parent company of Plains All American. Like its subsidiary, Plains GP pays a sizable 8% dividend. Given its interest in Plains All American is the company's primary asset, Pradhan's bull thesis on the subsidiary also holds true for the parent. The company's solid portfolio of assets, its ability to land new projects and its backlog of future production are all reasons to like the stock. Pradhan says both stocks deserve to trade at a premium valuation to Permian peers. Bank of America has a "buy" rating and $23 price target for PAGP stock.
Altria Group (MO)
Altria is the parent company of Philip Morris USA and its leading tobacco brand Marlboro, which accounts for more than 50% of U.S. cigarette sales. Altria also has a 10% stake in alcohol giant Anheuser Busch Inbev (BUD), a 45% stake in Canadian cannabis producer Cronos (CRON) and a 35% stake in e-cigarette company Juul Labs. Analyst Lisa Lewandowski says cannabis could provide the growth Altria needs to offset declining cigarette volumes. Altria has a 6.1% dividend. Bank of America has a "buy" rating and $54 price target for MO stock.
Royal Dutch Shell (RDS.A)
Royal Dutch Shell is the second-largest public oil major in the world based on 2018 revenue. Analyst Christopher Kuplent says Shell's shareholders have been rewarded for their patience in a difficult oil market. By reducing the stock's share count via buybacks by 25% through 2025 and nearly 50% through 2030, Kuplent says Shell can grow its dividend per share by 4% annually without increasing its total annual distributions. Shell already pays a 6.5% dividend. Bank of America has a "buy" rating and $73 price target for RDS.A stock.
China Petroleum & Chemical (SNP)
China Petroleum, also known as Sinopec, is the largest U.S.-listed global oil major, producing $426 billion in revenue last year. Analyst Matty Zhao says Sinopec's biggest selling point is its 8.9% dividend, but there are other reasons to like the stock as well. He says refining margins in China are "solid," and losses in the company's exploration and production businesses would drop significantly if there were a meaningful rebound in crude oil prices. Bank of America has a "buy" rating and $83.20 price target for SNP stock.
Occidental Petroleum Corp. (OXY)
Occidental is a global oil, gas and chemical company. Occidental acquired Anadarko Petroleum for $38 billion in 2019. Analyst Doug Leggate says Occidental's first post-merger quarter was a bit of a disappointment, but he is optimistic about its longer-term outlook. Leggate says Occidental pays the highest yield of the largest exploration and production companies, and Anadarko's cash flow will support the dividend. Furthermore, Leggate says post-deal asset sales and synergies appear to be running ahead of schedule. Occidental has an 8.4% dividend. Bank of America has a "buy" rating and $80 target for OXY stock.
Williams Companies (WMB)
Williams is a largely pure-play U.S. natural gas infrastructure company. Analyst Derek Walker says there is no question the natural gas environment is challenging at the moment. However, Walker says management's plan to cut back on spending and ease dividend growth in 2020 is prudent under the circumstances. Even in the difficult market, Williams recently said it plans to fully cover its 2020 growth capex and dividends via its cash flow. Williams pays a 6.5% dividend. Bank of America has a "buy" rating and $27 price target for WMB stock.
Vermilion Energy (VET)
Vermilion is a geographically diverse oil exploration and production company with operations in Canada, France, the Netherlands, Australia and several other countries. After a difficult 2019, Vermilion management is cutting its exploration and development budget by 13% in 2020, but the company is still projecting greater than $400 million in 2020 free cash flow. Analyst Asit Sen says the massive dividend and Vermilion's differentiated asset base and business model make the stock a solid investment. Vermilion has a 14.3% dividend. Bank of America has a "buy" rating and $25 price target for VET stock.
Telefonica Brasil (VIV)
Telefonica Brasil is the leading telecom service provider in Brazil, with more than 80 million customers and nearly 30% market share. Analyst Rodrigo Villanueva says Telefonica Brasil's wireless revenue growth improved to 4.6% last quarter, driven by 5.5% growth in wireless data and digital revenue. Villanueva says high FCF relative to dividend payout and a potential ramp in wireless revenue growth due to pricing leverage is a winning combination for investors. Telefonica Brasil pays a 9% dividend. Bank of America has a "buy" rating and $60 price target for VIV stock.
Westlake Chemical Partners (WLKP)
Westlake is an MLP that owns stakes in three ethylene chemical production facilities. Analyst Steve Byrne says a challenging ethylene environment has weighed on margins in recent quarters, but the company's stable cash flow and its business relationship with Westlake Corp. (WLK) makes its distributions reliable. In the near term, Byrne sees the company's acquisition of a nearly 50% stake in the Lotte ethylene cracker in Lake Charles, Louisiana, as a growth opportunity. Westlake has an 8.3% dividend. Bank of America has a "buy" rating and $30 price target for WLKP stock.
Western Asset Mortgage Capital Corp. (WMC)
Western Asset is a real estate investment trust that invests in mortgage-backed securities not backed by the U.S. government. Hewett says Western Asset management found attractive investment opportunities and has prioritized dividend stability. Hewett says the REIT's high yield should support the share price, and its earnings outlook should continue to fund its current payout. In addition, if interest rates start to rise again in 2020, Hewett says Western Asset's business is relatively insulated. Western Asset has an 11.9% dividend yield. Bank of America has a "buy" rating and $10.50 price target for WMC stock.
Fortress Transportation and Infrastructure (FTAI)
Fortress owns and operates global transportation assets. Analyst Ariel Rosa says Fortress' recent $130 million sale of Central Maine and Quebec Railway helped unlock value in its railroad business and further advance the company's strategy of focusing on its aviation leasing and infrastructure segments. Rosa says Fortress trades at a valuation discount to its peers despite long-term organic and acquisition-driven growth opportunities. Rosa says Fortress offers investors a rare combination of cash flow growth and a 7% dividend. Bank of America has a "buy" rating and $22 price target for FTAI stock.
Best high-yield dividend stocks to buy for 2020:
-- AllianceBernstein Holding (AB)
-- Bain Capital Specialty Finance (BCSF)
-- Enterprise Partners Products (EPD)
-- Energy Transfer (ET)
-- Ford Motor Co. (F)
-- Hoegh LNG Partners (HMLP)
-- Mobile Telesystems (MBT)
-- MPLX (MPLX)
-- Plains All American Pipeline (PAA)
-- Plains GP Holdings (PAGP)
-- Altria Group (MO)
-- Royal Dutch Shell (RDS.A)
-- China Petroleum & Chemical (SNP)
-- Occidental Petroleum Corp. (OXY)
-- Williams Companies (WMB)
-- Vermilion Energy (VET)
-- Telefonica Brasil (VIV)
-- Westlake Chemical Partners (WLKP)
-- Western Asset Mortgage Capital Corp. (WMC)
-- Fortress Transportation and Infrastructure (FTAI)
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