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.

Altria

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.

AT&T

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.

Energy stocks as a whole underperformed in 2019, but this one remains a top play for conservative investors and is one of the top picks for 2020 at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products. The company consistently demonstrates disciplined investing, operational excellence and technological innovation. Note that Exxon has one of the highest paid American CEOs.

The company raised the dividend last year by a nickel per share to $0.87, which translates to a very solid 5% dividend. The whopping $100 Merrill price objective compares with a $78.47 consensus target and the most recent close at $69.78.

LyondellBasell

This top chemical company with a sterling balance sheet is another solid play for conservative investors. LyondellBasell Industries N.V. (NYSE: LYB) manufactures chemicals and polymers, refines crude oil, produces gasoline blending components and develops and licenses technologies for production of polymers. After getting crushed in the late summer, the stock has rallied back nicely.

Over half of earnings are generated in the company’s Olefins and Polyolefins Americas segment, where costs are linked to the price of cheap natural gas in the United States, while selling prices are correlated with the price of oil. The company has pursued a strategy of low-cost, high return on invested capital debottlenecks coupled with cash returns to shareholders.

Note that debottlenecking is the process of identifying specific areas or equipment in oil and gas facilities that limit the flow of product (known as bottlenecks) and optimizing them so that overall capacity in the plant can be increased.

Investors receive a 4.45% dividend. Merrill Lynch has set its price target at $101.73. The consensus target is $107, and shares closed at $94.48.

Occidental Petroleum

This energy company made huge news last year with a Warren Buffett backed purchase of Anadarko Petroleum. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals.

The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.

The shares have underperformed since the Anadarko acquisition was announced, but the investment case anchored by yield has not changed. With its rock-solid balance sheet and a commitment to dividend coverage, investors look safe for now.

Shareholders receive a massive 7.67% dividend. The Merrill analysts have a huge $80 price target. The consensus target is much lower as $49.55, and the stock closed Tuesday at $41.21.

While a repeat of the 2019 gains would be an outstanding start to the new decade, the odds are stacked toward a more normal year for investment returns, with the potential for increased volatility. With trade, politics and other issues weighing on sentiment, it makes sense to stay with large-cap dependable market leaders that pay solid quarterly dividends.

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