Merrill Lynch Has 5 Top Dividend-Paying Total Return Stocks for 2020

What a year it was: 2019 delivered the best investment returns in years, with all the major indexes posting massive double-digit gains. Yet, with the new decade comes the reality that a one-off year like 2019 is an anomaly, and it’s a good bet that stock market returns for this year could be limited to the low- to mid-single digits.

Savita Subramainan, equity strategist at Merrill Lynch, has a 3,300 price target for the S&P 500 for 2020, and that is not very far from where we closed on the last trading day of 2019 at 3,230. The question for investors is what the best route to take for 2020 is, and going for total return may be the answer.

We like to remind our readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%: 10% for the increase in stock price and 3% for the dividends paid.

We screened the Merrill research universe looking for stocks rated Buy, paying large dependable dividends and with solid upside potential for 2020. We found five that look good in what could prove to be a volatile year for equity markets, and one is among the top Merrill Lynch picks for 2020.


This maker of tobacco products still offers value investors a great entry point and was hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro, one of the most valuable brands in the world.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs. The company also has purchased a 45% stake in cannabis company Cronus for $1.8 billion.

The negative press on vaping has been a big headwind, and the crash in marijuana stock prices have weighed on this worldwide leader. In addition, the legal age to buy tobacco products recently was raised to 21. Despite all the headwinds, investors are still able to buy the stock at a very reasonable price.

Investors pocket a huge 6.73% dividend. The Merrill price objective is $54, and the consensus target is $53.75. Shares were last seen trading at $49.91.


This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

The Merrill team noted this when discussing 2020 potential for the communications giant:

Our price objective is based on a P/E multiple of 12 times our fiscal year 2020 EPS estimate, which is in the middle of AT&T’s historical relative multiple range vs the S&P 500. We think this is warranted based on challenging operating trends within AT&T’s television business, higher leverage, and integration risk, but offset by higher earnings estimates and faster growth after baking in the impact of the company’s stock buyback and cost savings initiative.

AT&T investors receive a 5.32% dividend. Merrill has a $43 price target for the shares, while the consensus target across Wall Street is $39.02. The stock closed Tuesday at $39.06.