This Stock Looks Like a Fantastic Investment for 2020 (and beyond)

The upcoming 2020 US presidential election.

An active US presidential impeachment.

A US stock market near all-time highs.

So much uncertainty, yet so few investment opportunities.

Well, there might be more investment opportunities than you think.

In fact, I can provide you with 10 fantastic investment opportunities.

I recently put the finishing touches on an exclusive report that lays out my top 10 stocks for 2020… and I’m revealing one of these stocks in just a moment.

This monster report is a must-read for serious investors looking to put capital to work in an elevated market.

All 10 stocks are high-quality dividend growth stocks that look attractively valued right now.

As I show you in my special report, high-quality dividend growth stocks are some of the best stocks you can possibly buy for the long run.

They consistently beat the market over long periods of time. All while paying ever-larger amounts of passive income along the way.

Dividend growth stocks offer investors an opportunity to have their cake and eat it, too!

You get that potential outperformance, especially when undervaluation is present, along with more income than the market typically provides.

Every stock I’ve chosen for 2020 has a market-beating yield – some offer a market-smashing yield.

Combining that above-average quality and above-average yield with below-average valuation is an easy path to excellent returns for both the coming year and many years into the future. 

I’m going to give you a glimpse of this special report by sharing some information on one of the 10 featured stocks.

A Top 10 Stock for 2020: General Dynamics Corporation (GD)

General Dynamics Corporation is a global aerospace and defense company.

FY 2018 sales are broken up across the following business segments: Information Technology, 23%; Aerospace, 23%; Marine Systems, 24%; Combat Systems, 17%; and Mission Systems, and Mission Systems, 13%.

Revenue for FY 2018 also breaks down by customer group: 65%, US government, 21% international defense and commercial, and 14% US commercial.

Many facts of life are uncomfortable to accept.

A good example is war.

Conflict has been an omnipresent feature of human civilization for as long as we’ve been around. Unfortunately, I don’t see that changing.

This fact of life has brought about a number of high-quality companies that provide the offensive and defensive systems designed to protect sovereign interests. And these defense contractors are some of the most well-run and profitable organizations you’ll come across.

General Dynamics is one of my favorite defense contractors.

That’s because the business is so, well, dynamic.

You certainly get the exposure to arms. I mean, this company manufactures the Abrams tank and the Virginia-class nuclear-powered submarine. These are serious defense systems. And it’s not like a new competitor could just up and start manufacturing tanks and warships. The scale and contracts present almost insurmountable barriers to entry.

But a fantastic aspect of this business lies in its IT capabilities.

Conflict is increasingly becoming more digital in nature. Cyber warfare is arguably as much a threat as real warfare.

Well, General Dynamics saw that future coming and acquired IT contractor CSRA for $9.6 billion, turning General Dynamics into the largest provider of IT services to the US government.

In addition, they have a major non-defense exposure through their commercial Gulfstream jet business.

They’re not as reliant on the US government as some of the other major defense contractors. And they’ve more or less future-proofed the company with the IT side of the business.

Both sides of the company are doing very well right now.

The DoD awarded the company’s CSRA business a $7.6 billion cloud contract back in august. Then General Dynamics won a $22.2B contract from the U.S. Navy in December for construction of nine Virginia-class submarines.

If business is war, General Dynamics is winning.

Yet the stock trades at a discount to both the broader market and most of its peers.

The P/E ratio is sitting at 15.64, which is well below both the broader market and the stock’s own five-year average P/E ratio (17.8).

The multiple on cash flow, at 19.9, is also markedly lower than the stock’s own three-year average P/CF ratio of 22.9.

While you wait for the price to catch up to value, you’re getting paid handsomely.

The stock offers a yield of 2.26%.

And with 28 consecutive years of dividend raises, protected by a payout ratio of 35.4%, you can count on that dividend growing year in and year out.

That growth, by the way, is pretty huge.

The 10-year dividend growth rate is 10.5%, which is obviously much higher than the US inflation rate. That means shareholders’ purchasing power is regularly increasing.

Their balance sheet isn’t as stellar as it once was (due to that aforementioned CSRA acquisition), but the financial position is still solid, with an interest coverage ratio of ~12.

Make sure to check out my in-depth write-up and analysis on this stock, which concluded that it’s worth closer to $209/share.

Investors buying in now could be looking at a 24% total return over the next year.

That includes the valuation upside, annual dividend, and anticipated EPS growth rate of 6% from CFRA (which would be slightly lower than the company’s 10-year EPS growth rate).

There’s almost nothing to stop this business, especially with the recent record defense bill for 2020 now authorized.

This is one of my best long-term ideas, but 2020 might be a real breakout year.

Bottom line: General Dynamics Corporation (GD) is a high-quality company that is poised to take advantage of global trends and changes in sovereign defense. The recent multi-billion-dollar contracts they’ve landed is proof of that. Further proof is the long-term revenue, profit, and dividend growth this company has produced.

General Dynamics practically prints money. Investors are set up for a 24% total return over the coming year. It looks like a fantastic investment for 2020 – and beyond.

-Jason Fieber

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