After hefty gains in 2019, when the S&P 500 added 29%, most analysts are predicting that markets will show decidedly more modest gains in 2020. The consensus view is, that stocks will appreciate between 3% and 5% in the coming year. While it’s not a gloomy picture, it does mean that investors will need to look outside of share prices for strong returns.

This will naturally pull many investors right into dividend stocks. The reasons are simple. Interest rates are low, after 3 Fed cuts in 2019 brought them down to just 1.5% to 1.75%. With the Fed’s key rate pared so far back, Treasury bond yields are also low, holding between 1.5% and 2%. Among S&P listed companies, the average dividend yield of 2% still beats interest rates and bond returns. And remember: there is no ceiling on dividend yields.

We’ve used TipRanks’ Stock Screener tool to seek out small- and mid-cap stocks with high dividends – that is, with yields exceeding 6%. To narrow it further, we looked only at stocks with ‘Strong Buy’ consensus ratings. TipRanks has a database encompassing over 6,500 stocks; our search parameters narrowed that down to 30. Here is the low-down on three of those.

Hess Midstream Operations (HESM)

The energy industry, especially the crude oil and natural gas extraction activities, has given a turbo boost to the US economy in recent years. Providing jobs and energy at the wellheads, in the midstream, and at the customer’s point of purchase, energy products also provide the fuel of our daily lives.

Hess Midstream provides infrastructure system for oil companies in the Bakken Shale of North Dakota and Montana. The company owns a variety of assets, including crude oil, natural gas, and water gathering pipelines, pipeline and rail line terminal facilities, and natural gas plants.

Last month, Hess completed an organization change that marked its transition from a small-cap limited partner to a mid-cap independent midstream operator. The company conducted a merger between the midstream operator branch and the corporate partnership. In short, Hess Midstream Partners successfully acquired Hess Infrastructure Partners. The HESM ticker inherited HIP’s market history. Shares are up 15% since the December 16 announcement.

The company didn’t just reorganize and simply its partnership – it also maintained its lucrative dividend. HESM currently pays out 41 cents per quarter, and has raised that dividend payment every quarter since August 2017. At $1.64 annualized, the dividend gives a yield of 6.91%, well over triple the average in the broader market.

Writing from Credit Suisse, market analyst Spiro Dounis says of final quarter projections, “We expect sequentially higher results, largely driven by volume ramp on LM4 and continued strength in Tioga volumes as spare capacity is backfilled with third-party volumes.” He adds that, “This should be a noisy accounting quarter with HESM reporting consolidated results for the first time following the close of the HIP acquisition on December 16.”

Dounis is upbeat about HESM, and gives the stock a $26 price target, indicating room for 10% growth to the upside. (To watch Dounis’ track record, click here)

HESM has built its Strong Buy consensus rating on solid performance which has attracted 3 "buy" ratings in the last three months, as opposed to only 1 "hold." This stock is selling for $23.91, so the $26.50 average price target implies an upside of ~11%. (See Hess Midstream stock analysis at TipRanks)

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