BTW, if you dictate normally including any new lines, etc. Ignore the space. If you tap Enter, your text will be correctly displayed.
If you needed dictation so badly, then you should not have bought a Mac. Dragon Dictate works quite well on most Windows computers. It would be preferred for dictation and speech recognition. Dictation on the Mac is actually quite good. What you are seeing is something oddly introduced in Catalina. Hopefully, it will get fixed. Dictation has always worked properly until now.
Don't forget you also have Voice Control available separately.