After a strong show in 2019, the U.S. economy is likely to have stepped into another eventful year. Experts believe that a 50-year-low unemployment rate of 3.5% and strength in labor markets are likely to help the economy dodge another recession.
At the end of the third quarter of 2019, the U.S. real GDP had risen 2.1%. The S&P and Nasdaq gains averaged above 18%, while the Dow had posted an average gain of 15%. Going by historical trends, experts believe that these indices are in for another bumper year.
Let’s take a look at how the U.S. economy is poised to grow at this moment.
U.S.-Iran tensions have flared up of late, making experts fret about the possibility of greater economic turmoil in the days ahead.
In fact, right after Iran’s missile strikes, U.S. stocks initially plummeted while oil prices shot up. However, this was immediately followed by a sharp rally in stocks and a plunge in oil prices, with the S&P 500 soaring to a new all-time high. In fact, on Jan 10, oil prices slipped toward $65.65 a barrel, boosting investors’ sentiments, focused on rising U.S. inventories and signs of ample supply.
Given this backdrop, experts see some de-escalation in tensions between the nations but they are also not discounting possibilities of a war.
Other Bumpers Ahead
Despite the current air of positivity, investors should be mindful of a few roadblocks.
A recent article by Indiana University’s Kelley School gives us a mixed view on the U.S. economy. It projects the economy to continue expanding for the 12th consecutive year in 2020 but only by a mere 2%, thanks to political dysfunction and international trade friction. Per MarketWatch, the yearly wage growth peaked at 3.4% last spring and has been drifting lower ever since. This is expected to lower consumer spending in 2020.
Also, trade tensions between the United States and China affected international trade throughout 2019. Though both the sides recently approved a "phase-one" deal, some of the controversial issues are unresolved, dampening market sentiments.
Dividend Stocks in Focus Now
Given the current situation, investors are likely to rely on fundamentally stable and regular income-generating stocks. In fact, stocks that have high dividend yields have always been investors’ forte. For an investor, dividend growth is an immensely important statistic to focus on at any point of the economic cycle, as these stocks brace their portfolios from market volatility. Hence, considering the positive growth trajectory of the U.S. economy to date, it will be a prudent move for investors to add high-yield dividend stocks for long-term gains.
Further, the Fed kept interest rate unchanged in December and signaled at no change of plans in 2020. This will enhance prospects of dividend investing, making the following companies attractive bets for 2020.
Choosing the Right Stocks
We have taken the help of the Zacks Stock Screener to zero in on seven stocks which carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). Apart from a favorable Zacks Rank, we have chosen companies with market cap of more than $100 million. Also, each of these stocks has a dividend yield of more than 5%. They have also gained more than 10% over the past year and have a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our first pick is Artisan Partners Asset Management Inc. APAM. The Zacks Rank #2 company is an independent investment management firm that provides a broad range of U.S., non-U.S. and global equity investment strategies. Artisan Partners has a dividend yield of 7.8% and its expected long-term earnings growth rate is projected at 11%. The stock has a Growth Score of B.
The stock has returned 70.5% compared with the industry’s 14.8% rally.
Next on our list is Crestwood Equity Partners CEQP. The Zacks Rank #1 company offers a natural gas and storage business in Texas apart from crude oil services business. Crestwood has a dividend yield of 7.6% and its expected long-term earnings growth rate is projected at 5%. The stock has a Growth Score of B.
The stock has returned 12.2% compared with the industry’s 4.3% rally.
Zacks Rank #1 company Teekay LNG Partners L.P. TGP is also a solid pick. The company provides liquefied natural gas and crude oil marine transportation services under long-term and fixed-rate contracts. Teekay LNG has a dividend yield of 5.1% and its earnings are expected to grow a whopping 45.6% in 2020. The stock has a Growth Score B.
The stock has returned 28.8% compared with the industry’s 25.2% rally.
Investors can also pick Telefonica Brasil S.A. VIV. The Zacks Rank #2 company is the Brazilian subsidiary of Spanish telecom giant Telefonica SA. With the acquisition of Vivo, Telefonica Brasil became the largest telecom operator in Brazil in terms of revenues. Telefonica has a dividend yield of 5.8% and its expected long-term earnings growth rate is projected at 8.6%. The stock has a Growth Score of B.
The stock has returned 14.5% against the industry’s 25.9% decline.
Lastly, TRIBUNE PUBLISHING CO is worth a bet. The Zacks Rank #2 media company offers sports, entertainment, business, real estate and travel news and information, primarily in the United States. TRIBUNE PUBLISHING has a dividend yield of 7.8% and its earnings are expected to grow 4.7% in 2020. The stock has a Growth Score B.
The stock has returned 20.2% compared with the industry’s 8.6% rise.
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