Dividend stocks are always popular. They offer investors a clear path to quick returns, with regular cash payments and a yield – a return on the original investment – that usually far exceeds bond yields. But not all dividend stocks are created equal, and some offer better opportunities than others.

Dividend yield is a key metric. Among S&P listed companies the average yield is only 2%, but even that is higher than the Fed’s key rate of just 1.75%. However, the highest yields aren’t always the way to go. Investors should also consider share appreciation, upside potential, and past performance – these factors aren’t always connected to dividends, but they will affect the general returns available from a given stock.

International banking firm Credit Suisse has been starting off the new year with in-depth looks at various stock sectors. We will examine the firm’s favorite dividend stocks. These are the stocks that the firm sees bringing investors the best combination of returns, including dividend growth, in 2020.

Enterprise Products Partners (EPD)

We’ll start with an energy company. Enterprise Products inhabits the midstream sector of the oil and gas business, owning and operating almost 50,000 miles of natural gas and crude oil pipelines. Add in storage capacity for 14 billion cubic feet of gas and 160 million barrels of oil, along with import/export terminals on the Texas Gulf coast, and Enterprise stacks up as an important player in the oil boom.

2019 wasn’t kind to Enterprise. Low prices for oil, along with high expenses and slipping margins, hurt the company in the bottom line. Fourth quarter numbers are not available yet, but in Q3 EPD missed the forecasts for revenues and EPS. On the top line, revenues hit $7.94 billion, 3% below the estimates, while EPS missed by 5.7%, at 50 cents.

Through it all, EPD has maintained its dividend. The company as a long history of committing to sharing income with shareholders, and has kept up dividend payments for the last 20 years. The yield has varied over the years, but since Q3 2014, the payment has steadily risen. The current payment, 44.25 cents quarterly, annualizes to $1.77. The yield, at 6.29% is more than triple the average among S&P companies.

Writing on EPD for Credit Suisse, analyst Spiro Dounis says, “EPD is one of the best positioned companies in the industry... We expect to EPD to continue to take advantage of its scale and integrated system in order to offer competitive rates on new projects to continue to grow its market share… We see consistent FCF generation growing to >8% yield by 2023, which should allow for an increased focus on capital returns moving forward.” Dounis’ last point is the key, as those capital returns can include increased dividends.

Dounis gives the stock a Buy rating with a $34 price target, suggesting an upside of 21% from current levels. (To watch Dounis’ track record, click here)

Like Dounis, Wall Street is picking EPD as a long-term winner. With 6 Buy ratings assigned over the last three months, the stock earns a ‘Strong Buy’ analyst consensus. Adding to the good news, its $34.83 average price target puts the upside potential at 23%. (See Enterprise Products’ stock analysis at TipRanks)

Ford Motor Company (F)

Dearborn, Michigan’s Ford Motor is the smallest of the Big Three American automakers. The company is famous for being the first to introduce assembly line techniques into modern factory manufacturing over a century ago. Ford has found continued success in its popular, long-running F-series of pickup trucks and their derivatives.

In 2018, Ford saw both a production decline and a gain in top-line revenues, with sales totaling over $160 billion that year. In Q3 2019, the most recent for which data is available, the company beat the earnings forecast while just missing on revenues. The quarterly results, the first reported after the company’s bonds were reduced to junk status by Moody’s, showed 34 cents EPS, 8 cents better than expected, and total auto revenues of $33.93 billion, within one percent of the forecast. The company is in the midst of a major restructuring program, spending over $11 billion on factory modernization, new vehicle design, and a major manufacturing push toward electric vehicles.

The company is not forgetting its shareholders and investors, even if the business climate is difficult. Ford has paid out its regular dividend, at 15 cents per quarter, for the last five years – and has interspersed those payments with occasional special dividend payments. Despite small sum of the payment, F’s low share price makes the yield high – an impressive 6.37%. The reliability with which the company has maintained that dividend makes Ford a true dividend champ.

Credit Suisse’s Dan Levy is optimistic about Ford’s recovery plan and future prospects. He writes, “We see upside to earnings improvement / positive earnings revisions ahead, as the healthy parts of the business remain strong (i.e., North America trucks, Ford Credit), while the underperforming businesses see some recovery (i.e. Europe and China)… Ford has ample opportunities to drive profit recovery / earnings improvement – making it one of the few positive EPS revisions stories in the autos sector.”

Levy’s Buy rating is backed by a price target of $11, and an upside of 17%. (To watch Levy’s track record, click here)

Despite the company’s strong turnaround prospects and clear upside potential, F shares have a Hold rating from the analyst consensus. The stock has received 8 analyst reviews in recent months, including 2 Buys, 4 Holds, and 2 Sells. Ford shares sell for a bargain, just $9.42, but the $10.40 average price target indicates an upside of 11.47%. (See Ford’s stock analysis at TipRanks)

International Business Machines (IBM)

IBM is a blue-chip standard of the Dow Jones, producing the office equipment that everyone needs. It’s Selectric typewriters long dominated the electric typewriter market. The company has been at the forefront of computing technology since the days of punch-card computers, and IBM’s PCs helped to set the standard for desktop computing. IBM acquired Red Hat last year, in a move that sets it up to enter the cloud computing market. The company sees annual sales revenue in the neighborhood of $80 billion, and has a market cap of $119 billion. In short, IBM is a force to be reckoned with in business tech.

Maintaining a position at the top comes with a high price tag, however. The Red Hat acquisition cost IBM $34 billion, and resulted in bookkeeping losses that pushed Q3 – the most recent reported – down, with revenues of $18.03 billion just below the $18.22 estimate. There was good news in the quarter, though: EPS, at $2.68 was in line with expectations, and the new Red Hat subsidiary saw a 20% gain in revenues.

Like Ford, IBM has kept up a commitment to its dividend during hard times. At $1.62 quarterly, the payment annualizes to $6.48. The company has been raising the dividend steadily since 2011, has maintained payments for almost 20 years. The yield, at 4.79% is more than 2 and half times higher than average on the S&P 500.

Matthew Cabral, a 4-star analyst with Credit Suisse, sees IBM as a company is the process of shifting gears, implementing a new strategy to cope with a changing business tech environment. He writes, “The Red Hat acquisition marks a fundamental shift in strategy for IBM, bringing meaningful financial opportunity as they look to drive hybrid cloud adoption across enterprises… Execution on their hybrid cloud vision will be key to shifting the narrative of IBM, with both opportunity to accelerate the acquired business and the pull-through of ‘core’ IBM.”

Cabral puts a $173 price target on IBM, along with a Buy rating. His target implies an upside of 28% from yesterday's closing price. (To watch Cabral’s track record, click here)

Overall, IBM has a Moderate Buy rating from the analyst consensus, with 5 Buys and 4 Holds set in recent weeks. The stock also has the highest upside potential of the shares in this list – the current trading price is $135 and the average price target of $163.71 indicates 22% growth potential to the upside. (See IBM stock analysis at TipRanks)