5 High-Yield S&P 500 Stocks to Buy for 2020

U.S. stocks have surged way beyond analysts’ expectations so far this year. And as 2019 wraps up, the broader S&P 500 index is up more than 20% and is headed for its biggest annual gain since 2013. A global shift in monetary policy coupled with progress in the U.S-China trade deal helped stocks scale upward.

But, the bull run may slow down next year, if history is any guide. According to research firm Bespoke Investment Group, the S&P 500 index has been able to yield a muted return of 6.6%, on average, in the year following a rally of 20% or more since 1928.

Market pundits believe that there are quite a few reasons for the U.S. stock market to not continue the double-digit annual returns next year. This is primarily because the U.S. stock market currently seems to be overvalued, trading at around 19 times earnings, and thus doesn’t have much room to scale.

And how can we forget that the United States for most part of next year will face political uncertainty, eventually leading to gyrations in the stock market. But, it’s not just political risks that should bother investors. Rapid increase in government borrowing along with threat of more taxes and stringent regulations may jeopardize the U.S. stock market performance.

The U.S. tech sector, in the meantime, has helped the broader U.S. stock market climb north since the 2008 financial crisis and significantly outdo all other major equity markets. Thanks to the FAANG stocks and their adaptation of technologies, including AI and cloud computing, the tech sector has gained.

But now, FAANG stocks are facing increasing threat of regulation, leading to make us believe that such stocks may not perform well in the near future. And with it, the broader stock market may underperform. By the way, Joseph Davis, who serves as Vanguard’s chief economist, sees a 50% chance of a stock market correction or a 10% drop in 2020.

These S&P 500 Dividend Players Should Make 2020 a Happy New Year

Despite reasons to fret next year, investors should pick solid dividend payers without worrying about the stock market performance. This is because the best dividend stocks pay out healthy yields and have strong prospects, and are less susceptible to market gyrations. Their large customer base, sustainable business model, long track of profitability and strong liquidity allow them to offer sizable yields on a regular basis, regardless of market direction. At the same time, these stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Valero Energy Corporation VLO operates as an independent petroleum refining and ethanol producing company. The company has a Zacks Rank #2. Valero Energy has a dividend yield of 3.8%, while its five-year average dividend yield is 3.5%. The company’s expected earnings growth rate for the next year is 95.6%, compared with the Oil and Gas - Refining and Marketing industry’s projected rise of 13.5%.

Marathon Petroleum Corporation MPC engages in refining, marketing, retailing, and transporting petroleum products, primarily in the United States. The company has a Zacks Rank #2. Marathon Petroleum has a dividend yield of 3.4%, while its five-year average dividend yield is 2.8%. The company’s expected earnings growth rate for the next year is 74.4%, compared with the Oil and Gas - Refining and Marketing industry’s estimated growth of 13.5%.

Phillips 66 PSX operates as an energy manufacturing and logistics company. The company has a Zacks Rank #2. Phillips 66 has a dividend yield of 3.2%, while its five-year average dividend yield is 3%. The company’s expected earnings growth rate for the next year is 19.7%, compared with the Oil and Gas - Refining and Marketing industry’s projected rise of 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

QUALCOMM Incorporated QCOM designs, develops, manufactures, and markets digital communication products. The company has a Zacks Rank #1. QUALCOMM has a dividend yield of 2.8%, while its five-year average dividend yield is 3.6%. The company’s expected earnings growth rate for the next year is 48.5%, compared with the Wireless Equipment industry’s expected rise of 17.5%.

The AES Corporation AES operates as a diversified power generation and utility company. The company has a Zacks Rank #1. The company has a dividend yield of 2.8%, while its five-year average dividend yield is pegged at 3.7%. The company’s expected earnings growth rate for the next year is 9.7% compared with the Utility - Electric Power industry’s projected rise of 5.8%.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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The AES Corporation (AES) : Free Stock Analysis Report
 
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
 
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
 
Phillips 66 (PSX) : Free Stock Analysis Report
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
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