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Should you buy Harvey Norman shares for its dividend in 2020?

Harvey Norman Holdings Ltd (ASX: HVN) has established itself as a top ASX dividend stock in 2019.

The Aussie retailer has been a blue-chip staple for mum and dad investors across Australia for decades. However, it has been somewhat of a surprise packet this year.

Why the Aussie retailer is charging higher on the ASX

Coming into 2019, the outlook for Aussie retailers looked pretty bleak.

Economic data from the Reserve Bank of Australia (RBA) suggested that the retail sector was in trouble.

Sales were declining and consumer confidence faltering amid weakening global and domestic economic conditions.

Harvey Norman is a major brick and mortar retailer and I thought it would struggle this year.

One thing that Harvey Norman has always had in its favour, however, is a strong dividend yield.

The group is yielding a tidy 7.69% right now despite also climbing 34.81% higher in 2019.

Harvey Norman’s earnings (and dividend) have been helped by the recent RBA rate cuts as consumers have pounced on cheap credit. The boom of Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) have also opened up a new demographic.

Founder and chairman Gerry Harvey has been making headlines recently as activist shareholders look to change the group’s current corporate governance structure.

However, if its earnings keep climbing next year then Harvey Norman could be worth buying in 2020.

Should you buy Harvey Norman shares for its dividend?

Despite its issues, the Harvey Norman dividend could make buying its shares worth it in 2020.

The current 7.69% yield is better than that offered by listed rivals Ltd (ASX: KGN) and JB Hi-Fi Ltd (ASX: JBH).

When you combine that with the strong 34.81% capital gains and potential for even lower interest rates next year, I think Harvey Norman could be a buy for its dividend next year.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended ltd. We Fools may not 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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