Inflation is on the Rise – Dividend Stocks Can Counteract it

DIVIDEND STOCKS

Inflation is rising – and our money is losing value. The most recently published data indicate that year-over-year inflation in much of the Eurozone is above 4% – and U.S. inflation is even higher (above 5%). This is the highest level in decades – and is likely to go even higher in the coming months. Whether in construction, at Ikea or elsewhere, goods are in short supply everywhere. Heating pumps, for instance, have more than doubled in price over the last year – and in many regions, there’s a multi-month waiting list to get one. 

This illustrates that inflation is being driven not only by supply bottlenecks, but also by rising energy prices. Natural gas and crude oil prices have gone through the roof in recent months – you can see this at the gas station. Super-grade gasoline is almost impossible to get cheaply. With all this in mind, it’s a good time to build a portfolio that can offset the effects of inflation.  

High-Payout Dividend Stocks

Certain industries with steady income are ideal for this purpose. If you’re looking for stocks with high dividends, you should look at companies like:

  • Telecoms
  • Insurers
  • Real estate investment trusts (REITs)
  • Pipeline operators

All of these companies have steady revenues. Telecoms are increasingly focused on selling unlimited data plans – meaning that they collect the same bills month after month, regardless of how much their customers use

The situation is different with insurance companies; they tend to collect money annually. They also calculate premiums with potential claims in mind, so that there is something left over. This profit typically flows to shareholders as a dividend. Allianz SE (OTC:ALIZF) is a good place to start. 

REITs and Pipeline Subsidiaries

Real estate companies are especially valuable from a dividend investing perspective, especially if they’re structured as REITs. By law, these trusts must distribute at least 90% of profits to shareholders, which naturally leads to very high dividend yields (as much as 6% for many American companies). EPR Properties (NYSE:EPR) is a great example.

Below you can see the long-term price trend of the stock, which is staying very nicely above the 200-day line.

Source: Taipan

A few years ago, many U.S. energy companies took their pipeline subsidiaries public, but for the most part they are still the largest shareholders in these new entities. These subsidiaries are responsible for managing and leasing pipelines for transporting crude oil and natural gas.

These pipeline subsidiaries have similar appeal to REITs. Their largest shareholders (i.e. their parent companies) still want the largest share of the profits. This can only be achieved through dividends, and consequently these subsidiaries also offer very nice yields. 

High-Yield Dividend Stocks 

Another source of reliable dividends is old, well-established companies – particularly those which have been operating for more than a century. Here I would take a closer look at natural gas utility ONEOK, Inc. (NYSE:OKE) from Tulsa, Oklahoma.  

This stock has already started a breakout attempt to the upside after a brief pullback to the rising 200-day line. You can see the corresponding price trend from 2005 below.

Source: Taipan

If you do your research well, you can bring in some very nice passive income by buying dividend stocks. Another implicit benefit of investing in dividend stocks is peace of mind. Day-to-day price fluctuations aren’t particularly important, as long as the payout is consistent.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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