In 2019, the S&P 500 index returned nearly 30%! Analysts have cautioned investors that 2020 gains will be anemic, compared to 2019. Despite this warning, investors continue to pursue growth stocks at the expense of dividend or value stocks. As the saying goes, "what goes up must come down." One way an investor can prepare for any eventual stock market correction is to make a few smart investing moves in 2020, one of which is dividend stock investing. These 3 cheap, high-yield dividend stocks beat the S&P 500 index.

[Recommended: The Ultimate Interview Guide to Dividend Growth Investing.]

Do you know the only thing that gives me pleasure? It's to see my dividends come in.

John D. Rockefeller

1. Spark Energy (SPKE)

Spark Energy is a retail energy services company that specializes in the retail distribution of natural gas and electricity to residential and commercial customers. Based in Houston, TX, Spark Energy has a dividend yield of over 7.50%. This yield beats the S&P 500's laughable average yield of 2.00%. The stock has a market cap of over $340M. With a current share price of $9.68 and a Zacks Rank of 2 (Buy), SPKE is a dividend stock that could energize your portfolio. 

[Related: We exchanged our REIT ETF for 4 great REIT stocks. What took so long?]

Energize Your Portfolio with Spark Energy High-Yield Dividend Stock. Source: Pexels

2. Vector Group Ltd. (VGR)

Vector Group is a dividend monster that puts the S&P 500's yield to shame by offering a jaw-dropping 12.00% yield! Vector Group Ltd operates in two segments: Tobacco and Real estate. We'll let Vector Group Ltd introduces itself to you. This company has a few solid fundamentals that make its dividend attractive: an EPS (earning per share) of $0.70, a P/E ratio of 19.56, and a Zacks rank of 2 (Buy), among other things. With a market cap of $2B, an attractive share price of $13.63 and a Yahoo Finance 1 year Target Est of $25.71, Vector Group Ltd could add significant income to your portfolio!

3. New Residential Investment Corp (NRZ)

What would your portfolio do with a dividend yield of approximately 12.8%? That's what real estate investment trust (REIT) New Residential Investment Corp (NRZ) brings to the table. New Residential Investment Corp is "a leading provider of capital and services to the mortgage and capital services industry with proven track record of returns and performance." Some analysts may want to scare you away from NRZ, but here are a few reasons why you may want to give this dividend behemoth a chance:

  • A "hard-to-replicate diversified portfolio
  • Total shareholder return since inception: 147% (2011, New York, New York)
  • Book value growth since inception: 63%
  • ~6.5B market cap
  • P/E ratio ~ 20.0; EPS > $0.80
  • An affordable/cheap REIT stock: $16.67

The bottom line

A diversified portfolio should include fixed income to cushion against lurking bears. We believe high-yield dividend stocks can buttress your portfolio against stock market headwinds. Companies with solid fundamentals and a track record of consistently paying dividends that beat the 2% average yield of the S&P 500 are worth consideration. Spark Energy, Vector Group Ltd and New Residential Investment Corp all fit these criteria.

Here are a few other articles you may find useful: 3 large-cap growth index funds for your investment account | 10 shocking reasons why you will be broke at retirement | Dividends: A simple money secret you should know about | How to invest $50 | index funds vs ETFs vs stocks | 3 premium high-yield dividend stocks we're putting in our cononavirus basket.

Disclosure: We have no positions in any of the stocks mentioned above We wrote this article ourselves. It expresses our opinions. We do not receive compensation from the companies highlighted, nor do we have any business relationships with those companies. All data is current as of the article publication date.