The Motley Fool

4 FTSE 100 dividend stocks I’d buy for 2020

On Christmas Eve I wrote about the three top performers in the FTSE 100 in 2019. But to be honest, these probably aren’t the stocks I’ll be buying in 2020. At least, not unless they get a lot cheaper.

I reckon the best buys for the year ahead are more likely to be found among this year’s losers. I’ve been hunting around in the FTSE 100 for stocks that look undervalued and ripe for some good news. Here are four companies I think could outperform over the next year.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Learning lessons

Shareholders of education and publishing group Pearson have endured six profit warnings in seven years. Their shares have fallen by 50% in five years. And they’ve suffered a 65% dividend cut.  

So far, so much bad news. Things could get worse, but I think there’s potential here. The group’s online testing and training businesses are still growing. I think these assets are valuable and should have potential.

A new boss is due to take charge next year. With the shares trading on just 11 times forecast earnings, I think investors have an opportunity to buy ahead of the final stage of this turnaround.

Carry on cruising

The number of people going on cruise ship holidays continues to rise. But shares in the world’s largest cruise ship operator, Carnival, have fallen by more than 30% over the last two years.

There are some practical reasons for this, such as rising fuel costs and disruptions from hurricanes and political events. But the group’s full-year results show that despite these pressures, revenue rose by 10% to a record $20.8bn last year. Adjusted net profit, a more important number, was unchanged at $3bn.

Carnival says 2020 bookings are at record levels, albeit at slightly lower ticket prices than in 2019. I think that market worries are already in the shares. Trading on 11 times earnings with a yield of 4.3%, I rate Carnival as a buy.

Get ready for the summer

If you’re interested in leisure stocks but not sure about Carnival, then I’m also quite bullish on package holiday giant TUI Group. This German firm owns and operates many of its own hotels (and cruise ships) and also has an airline.

TUI has suffered from softer market conditions in some areas. It’s also incurred extra costs as a result of the Boeing 737 MAX grounding. This could continue in 2020.

However, as with Carnival, I think the bad news is probably in the price. I think TUI shares could be worth buying.

Power play

British Gas owner Centrica is the company everyone loves to hate. Yet in reality, the business has been through a difficult patch but is taking steps to turn things around.

Although chief executive Iain Conn will soon be leaving, I think he’s put in place the foundations of a recovery. Revenue from home services is rising and the flow of customers leaving British Gas is easing.

City analysts expect earnings to rise by 36% in 2020. These forecasts put Centrica shares on just 9.4 times forecast earnings, with a 5.7% dividend yield. I think this is the time to buy.

There’s a ‘double agent’ hiding in the FTSE…

We recommend you buy it!

You can now read our new stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to read our presentation.

Roland Head owns shares of Carnival and Centrica. The Motley Fool UK has recommended Carnival and Pearson. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.