Inflation is a hidden tax… don’t pay it!
If you’re keeping your hard-earned savings in cash, it’s losing value. Of course, you’ll want an emergency fund in cash… but with the rest, you can hedge against inflation by investing in some of the world’s best companies.
There’s a list of companies that continue to pay investors more each year. And these are some of the best dividend stocks around!
As inflation picks up, these dividend stocks can help you hedge against rising costs. As food, housing and gas continue to climb, these companies can push more costs along to customers.
The companies have to pay more to make, transport and sell their goods (higher wages, etc.)… but their sales climb as well and the companies continue to profit. In other words, these companies have pricing power.
This ability to push higher costs along to customers is great for investors. So, without further ado, here are the three best dividend-paying companies based on current market prices…
Best Dividend Stocks for Inflation
Coming in at number three…
3. Verizon (NYSE: VZ)
2. 3M (NYSE: MMM)
1. Intel (Nasdaq: INTC)
Each of these dividend stocks is a little different and I’ll show you their dividend history, current yield and safety, as well as some other brief highlights. I’ll show you why they’ve landed on the top of my buy list. For perspective as well, if you invested $100,000 evenly between these companies, you’d collect about $3,917 in 2022. And that should climb higher in the years ahead.
Dividend Yield: 4.65%
Payout Ratio: 48%
Verizon is a household name and it continues to see stable growth. The company has taken on a lot of debt but it has the cashflows to easily make its debt payments, reinvest in the business and continue to reward shareholders. Its current dividend yield comes in at 4.65% and it has a low payout ratio at 48%.
Here’s a look at its annual dividend growth over the past 10 years…
It’s up just over 30% and close to 3% on a cumulative annual growth basis. But if investors re-invested the dividends, they would have seen even higher returns.
For a huge stamp of approval, one of the world’s best investors bought shares of Verizon in late 2020. Warren Buffett – via Berkshire Hathaway – bought an $8.6 billion stake. That easily puts it within his top 10 publicly-traded holdings.
Based on Berkshire’s 13F filings, we can see Warren Buffett bought in at around $59.24 per share. And at the time of putting together this video, Verizon stock last traded at $55.11. That means investors can buy it at more than a 7% discount to Buffett’s buy price. You can get a better deal than one of the world’s best investors!
Of course, anything can happen to Verizon shares. Warren Buffett has made plenty of investing mistakes over the years. Although, on average, it’d be foolish to bet against him. And always, it’s good to diversify…
Dividend Yield: 4.06%
Payout Ratio: 59%
3M produces roughly 60,000 products and has great pricing power around the world. It generates nearly 50% of its revenue from outside the Americas. And you can become a co-owner in this great business!
You’re not going to see rapid growth from 3M but its slow and steady growth is hard to beat. Its dividend yield also comes in at 4.06%. The recent payout ratio is below 60% as well so it should be a very safe dividend in the years ahead.
Here’s a look at 3M’s annual dividend growth over the past 10 years…
It’s increased at a much faster rate than Verizon’s dividend. It’s up close to 170% and that’s over 10% on a cumulative annual growth basis. Over the past few years though, growth has slowed…
3M is playing it safe with some uncertain litigation risks and other short-term pressures. Although, 3M’s financial position is solid and it should be able to continue rewarding shareholders for many years to come. There’s a high probability dividend growth will pick up over the next decade to continue outpacing inflation.
Dividend Yield: 3.04%
Payout Ratio: 29%
Intel has the lowest dividend yield of these top dividend stocks to hedge against inflation. It comes in at 3.04%. Although, it’s one of the strongest financially and the dividend payout ratio has come in below 30% the past few years. On top of that, Intel also has some of the best growth prospects.
Here’s a look at the annual dividend growth over the past 10 years…
Intel’s dividend growth is up 78% and that’s close to 6% on a cumulative annual growth basis. We won’t likely see huge bumps in the next few years but long-term its dividend income should easily outpace inflation growth.
If you’ve been following the semiconductor industry, you’ll know Intel has lost some ground to competitors. Although, there’s a new CEO at the helm making some bold moves. And this isn’t your typical MBA CEO. Instead, he’s a proven engineer that’s helping put Intel back on track.
The man with the plan is Pat Gelsinger and he’s ramping up spending for Intel to expand. We’ll see higher OPEX and CAPEX in the next few years. As a result, profit margins will be lower… but even if some of the new projects don’t pan out as well as expected, Intel should continue to grow and reward shareholders. As always, I tend to follow the trendlines, not the headlines. I’ll link to a video on I’m investing in Intel vs. AMD in the comments below.
Dividend Stocks Inflation Hedge
Overall, these dividend stocks come from different sectors. They provide some diversification benefit and they should continue to boost their dividends each year.
To counter inflation, these dividend stocks should be a great way to go. I’ve personally invested a good chunk of my life’s savings in each of these companies. And if stock prices drop further, I plan on buying more.
Going one step further, here’s a deeper look at why I bought 3M stock. Also, what are your favorite dividend stocks at current levels if you had to buy new positions today? Let me know in the comments below or on my YouTube channel.