The U.S. stock market generated a stunning return in 2019. But after some unpleasant headlines in January, some investors are worried that 2020 may be a bit more challenging for investors.
From potential unrest in the Middle East to the global health threat posed by coronavirus to a general fear that stocks could be overvalued, there are clouds on the horizon creating a bit of negativity on Wall Street.
Thanks to strong operations and generous yields of more than 3%, these picks may offer a bit more stability than stocks dependent on consumer or business spending growth to power their profits in 2020.
If you're worried about volatility in the near future, consider these dividend stocks as ways to protect your portfolio but still tap into gains should the market keep moving higher:
-- Blackstone Group (ticker: BX)
-- Seagate Technology (STX)
-- Cogent Communications Holdings (CCOI)
-- Southern Co. (SO)
-- British American Tobacco (BTI)
Blackstone Group (BX)
Blackstone is a massive alternative asset firm that manages some $550 billion. Its investments include private equity deals such as acquisitions and recapitalizations, debt offerings to fund real estate projects and hedge fund-like strategies designed to generate returns wherever managers see opportunity.
As a global firm with major reach, BX is one of the preeminent money managers. Investors need a lot of cash to directly join the ranks of an investment vehicle like this, but buying BX stock is the next best thing as a portion of the returns generated by Blackstone are funneled back to shareholders via consistent dividends.
Current yield: 3.1%
Seagate Technology (STX)
Some income investors may recognize hard disk drive manufacturer Seagate, as its stock has generated a bunch of headlines in the last few years as it experienced plenty of ups and downs.
The challenge is it's legacy business is in hard disk drives in laptops and desktops, and in a mobile age these PCs are simply in less demand. But now that risk is well-known and reflected in its current operations and stock price.
While Seagate has focused heavily on growing its mass capacity drives and cloud computing businesses that are focused more on networks, the PC is not dead. Just visit any office and you'll see laptops and desktops galore. There may not be breakneck growth here, but there is a strong baseline business for this titan of the memory business. That adds up to reliable and generous dividends for shareholders.
Current yield: 4.1%
Cogent Communications Holdings (CCOI)
Cogent is a unique and specialized communications firm offering things like website hosting, content delivery and other business services its modest-sized clients need but can't fund in-house.
At just under $4 billion in market cap, CCOI is decidedly smaller than the big boys of telecom. But anyone who has experienced poor service or high prices from major providers like Verizon Communications ( VZ) or Comcast Corp. ( CMCSA) should understand why a company like CCOI exists. By bundling business communication services together for a fair price, this smaller telecom competitor has found a profitable niche.
Current yield: 3.5%
Southern Co. (SO)
Southern Co. is one of the largest utilities in the U.S. with a market capitalization of nearly $80 billion and about 9 million electric and gas customers. This scale provides SO with incredible reliability, particularly since the utility is characterized by low competition and high barriers to entry.
Last year, regulators approved a rate increase for SO. That all but guarantees profitable operations for years to come. In an age of energy efficiency, it's unlikely we will ever see demand spike for this utility, but yield-focused investors should still find the payout incredibly appealing.
Current yield: 3.6%
British American Tobacco (BTI)
Cigarette companies have long-term growth challenges for obvious reasons. The fact that smoking is bad for you is hardly a secret, after all. However, it's also true that there will always be a small group of willing consumers who buy BTI products including Newport and Camel cigarettes, Kodiak chewing tobacco and various vaping products.
British American is seeing decent top-line growth lately, but more importantly, it has a very entrenched customer base. That means even if things get rocky in 2020 and consumers cut back on certain expenses, you can be sure that they'll still purchase BTI products -- and fuel the firm's reliable and generous dividend as a result.
Sector: Consumer staples