Everyone loves owning dividend stocks. They may not drive your investment strategy, but you sure don't mind getting paid just to own a company. The important thing to remember with dividends is that they mean more the longer you hold them, thanks to the most powerful force in the universe: compound interest. So while it's fun to own dividend stocks now, I think it's even more fun to own dividend stocks in the future. Let's look at what might be the five best dividend stocks of 2020.
Air Lease (NYSE:AL)
This air lessor is one of my favorite long-term investments. Revenue and net income grew 45% and 48%, respectively, in the first quarter compared with 2012. That allowed the company to pay its first dividend ever in March, but at a yield of just 0.4%, there's plenty to look forward to. More established air leasing companies Aircastle Limited and Fly Leasing each pay a dividend that exceeds 4%. However, they don't match the growth of Air Lease, which is expecting to add 143 aircraft to its stable by 2017 and an additional 180 after that. Does a call get any easier than this?
The Blue Oval has returned 68% since the end of last July -- even with continuing dark clouds in Europe. This former dividend king has paid seven dividends since 2012 and looks to get back on track with improving financials and a built-for-the-future vehicle lineup. Ford is paying down its debt, increasing sales and income, and investing heavily in growth in Asian markets -- all harbingers of future success. As auto-master Fool John Rosevear has been telling investors for months, Ford is set for big gains in the next few years. So is the dividend.
Momenta Pharmaceuticals (NASDAQ:MNTA)
This is a riskier pick that could pay off in a huge way for investors. The company has developed a disruptive platform for modeling complex compounds, which could significantly reduce R&D costs throughout the industry. It wouldn't be on the list if it hadn't already proved its potential. After gaining approval in 2010 for its first product, a generic version of Lovenox for treatment of pulmonary embolism from Sanofi, revenue topped $283 million in 2011. That's pretty spectacular for a generic drug, but even more astounding is that profits for the year totaled $180 million -- a margin of 64%. While sales tumbled when competition emerged, Momenta is pursuing a healthy pipeline of drugs including up to six biosimilars, or generic biologics, over the next few years. Margins at just half of its watermark set in 2011 would easily enable a market-beating dividend.
Orbital Sciences (NYSE:OA)
Time to get some dividends in space. Orbital Sciences may be best known for competing with SpaceX for private contracts from NASA to resupply the International Space Station, but it has two other business segments contributing to the top and bottom lines. The company builds satellites for various uses and launch vehicles that carry them (and missile defense interceptors) into orbit. Revenue and operating profit have grown 28% and 109%, respectively, since 2009. If the company can continue to grow its way to higher margins, the multibillion-dollar opportunity for resupply missions and eventual human transport could be a driving force for a dividend -- even if it is capital-intensive.
The renewable-oils manufacturer may want to invest in growth opportunities at the beginning of the next decade rather than pay a dividend to shareholders, but if production costs are minimized, there should be more than enough cash to go around. Consider that at final commercial scale (fermenters of roughly 625,000 liters in volume), Solazyme believes it can produce a metric ton of oil for as low as $1,000. Selling prices for several oil profiles in development exceed $4,000 per metric ton. Now, some oils will be costlier and less efficient to produce than others, and the company has yet to move beyond 128,000 liter tanks. But throw in an explosion of annual capacity from nil today to 125,000 metric tons by mid-2015 -- and plans for an additional 325,000 metric tons in the years following -- and investors have to like the potential.
Foolish bottom line
The best thing about owning the best dividend stocks of the future now is that you get to maximize the compounding effect of growth. Share prices will grow in the years before distributions, while management will look to keep investors happy after initial growth phases with solid dividends. These are just five companies I believe will be great dividend stocks in 2020, but notice the similarities. They all have great growth potential with disruptive approaches to their respective industries. Do you know of another company that could make the list? Let me know in the comments section below.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio or his CAPS page, or follow him on Twitter, @BlacknGoldFool, to keep up with his writing on energy, bioprocessing, and emerging technologies.
The Motley Fool recommends Ford, Momenta Pharmaceuticals, and Orbital Sciences and owns shares of Ford, Momenta Pharmaceuticals, and Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.