5 Best Dividend Stocks To Help Hedge Inflation

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As inflation seems to be sticking around with rates above 3%, investors seek refuge in assets that can offer stability and growth. Dividend stocks, known for their consistent payouts and potential for capital appreciation, emerge as a compelling option in turbulent economic times. This article will explore five dividend stocks poised to help investors hedge against inflation while providing reliable income streams.

Dividends And Inflation

Dividend-paying stocks effectively hedge against inflation by providing a reliable income stream that tends to increase over time. These stocks offer income growth potential as companies often raise dividend payouts to offset rising costs associated with inflation. Unlike fixed-income securities, dividends from stocks have the potential to grow, protecting investors’ purchasing power.

Moreover, dividend income is typically paid out in cash, ensuring investors receive tangible returns regardless of market conditions. This cash flow provides a natural hedge against inflation. Additionally, dividend-paying stocks offer capital appreciation potential, as companies that consistently grow dividends attract investors seeking stable income streams, driving up stock prices over time.

Furthermore, companies prioritizing dividends tend to be financially stable, with solid cash flows and sustainable business models. Investing in these high-quality companies can offer security and stability during inflationary periods. Overall, dividend-paying stocks offer investors a compelling combination of regular income, income growth potential and capital appreciation, making them valuable assets for hedging against the erosive effects of inflation.

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5 Best Dividend Stocks To Hedge Inflation

Enterprise Products Partners (EPD)

  • Industry: Oil & Gas
  • Market Cap: $61 billion
  • P/E Ratio: 10x Earnings

Company Overview

Enterprise Products Partners is a leading North American provider of midstream energy services. Established in 1968 and headquartered in Houston, Texas, Enterprise is renowned for its extensive pipeline and storage infrastructure network, spanning key producing regions and significant demand centers in the United States. The company operates a diversified portfolio of assets, including natural gas, natural gas liquids (NGLs), crude oil, refined products, petrochemicals pipelines, storage facilities, fractionation plants and export terminals.

Enterprise’s integrated midstream system plays a critical role in the transportation, storage and processing of energy commodities, facilitating the efficient movement of hydrocarbons from production areas to end markets. The company’s strategically located assets provide producers, refiners and consumers with reliable access to essential energy infrastructure, supporting the supply chain for various energy products.

With a focus on operational excellence, safety and environmental stewardship, Enterprise is committed to delivering value to its customers while minimizing its environmental impact. The company prioritizes investments in technology, infrastructure expansion and asset optimization to enhance its operations’ efficiency, reliability and sustainability.

Enterprise Products is widely recognized for its financial stability, distribution growth and shareholder-friendly policies. As one of the largest publicly traded master limited partnerships (MLPs) in the U.S., Enterprise has a track record of generating stable cash flows and delivering consistent returns to its investors through regular distributions.

Why EPD Stock Is A Top Pick

Enterprise emerges as one of the top dividend picks for the remainder of 2024 due to its robust performance, stable cash flows and commitment to shareholder returns. As a leading player in the midstream energy sector, EPD boasts a resilient business model built on a diversified portfolio of midstream assets, including pipelines, storage facilities, fractionation plants and export terminals.

EPD’s strong financial performance is underpinned by its strategic positioning in key producing regions and major demand centers, ensuring consistent demand for its midstream services. The company’s extensive network of pipelines and storage infrastructure provides essential transportation and storage solutions for natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals, supporting the energy supply chain from production to consumption.

One of EPD’s most compelling attributes is its reliable cash flow generation, driven by fee-based contracts and long-term customer agreements. These contracts typically provide stable revenue streams and reduce exposure to commodity price fluctuations, enhancing the predictability and sustainability of EPD’s cash flows.

EPD’s commitment to maintaining a solid financial position and delivering value to its investors is evident in its consistently increasing distributions over time. The company has a long history of distribution growth, with a focus on sustainable and growing payouts to unitholders. EPD’s distributions are supported by its stable cash flows, disciplined capital allocation, and prudent financial management practices.

Furthermore, EPD’s distribution yield is attractive for income-oriented investors seeking reliable income streams in today’s low-interest-rate environment. With a competitive and sustainable distribution yield, EPD allows investors to generate steady income while benefiting from potential capital appreciation over the long term.

Coca-Cola (KO)

  • Industry: Consumer Staples
  • Market Cap: $271 billion
  • P/E Ratio: 21x Earnings

Company Overview

Coca-Cola Company is a global beverage corporation headquartered in Atlanta, Georgia. Known for its iconic Coca-Cola brand, the company produces and sells a wide range of non-alcoholic beverages, including carbonated soft drinks, water, juices and energy drinks. With operations in more than 200 countries, Coca-Cola maintains a vast distribution network, making its products accessible to consumers worldwide. The company’s portfolio includes numerous well-known brands, such as Sprite, Fanta and Dasani, catering to diverse consumer preferences and tastes. Coca-Cola is committed to innovation, sustainability and community engagement, striving to create positive social and environmental impacts while delivering refreshing beverages to consumers around the globe.

Why KO Stock Is A Top Pick

Coca-Cola stands out as a top dividend stock pick due to its consistent track record of dividend payments and strong financial position. As a leading global beverage company with a long history of profitability and resilience, Coca-Cola generates substantial cash flows, allowing it to sustain and potentially increase its dividend payouts over time. Additionally, Coca-Cola’s diverse portfolio of well-established brands and extensive distribution network provide stability and growth potential in various market conditions. Investors seeking reliable income and long-term capital appreciation may find Coca-Cola an attractive choice for their dividend-focused portfolios in 2024.

Prologis (PLD)

  • Industry: Logistics
  • Market Cap: $100 billion
  • P/E: 33x Earnings

Company Overview

Prologis is a global leader in logistics real estate, specializing in developing, acquiring and managing industrial properties. Headquartered in San Francisco, California, Prologis operates a vast portfolio of warehouses, distribution centers and logistics facilities across major markets worldwide.

The company’s strategic focus on providing modern, high-quality logistics facilities supports the needs of e-commerce, retail, manufacturing, and logistics companies seeking efficient and flexible distribution solutions. Prologis’ properties are strategically located near key transportation hubs, ports, and population centers, facilitating seamless movement of goods and optimizing supply chain operations for its customers.

With a presence in major markets across North America, Europe and Asia, Prologis serves a diverse customer base of leading global brands and logistics providers. The company’s commitment to sustainability and environmental stewardship is evident in its efforts to design and operate energy-efficient, environmentally responsible facilities.

Why PLD Stock Is A Top Pick

Prologis earns its position as one of the top dividend stock picks for the remainder of the year due to its status as a leading real estate investment trust (REIT) specializing in logistics and distribution facilities. As the global leader in industrial real estate, Prologis owns and operates a vast portfolio of high-quality properties strategically located in key logistics hubs worldwide.

One of the primary reasons for Prologis’ appeal as a dividend stock is its consistent track record of dividend payments and increases, with payouts up 65% since 2020 only. The company has a history of delivering reliable and growing dividends to shareholders, driven by its stable cash flow generation and disciplined capital allocation strategy.

Prologis’ business model is underpinned by long-term leases with creditworthy tenants, providing a steady stream of rental income that supports its dividend payments. Additionally, the increasing demand for logistics and distribution space driven by e-commerce growth and supply chain modernization further bolsters Prologis’ revenue visibility and rental income.

Moreover, Prologis benefits from its scale, expertise and global footprint, enabling it to capitalize on attractive investment opportunities and navigate various market cycles. The company’s focus on owning and developing modern, sustainable logistics facilities in strategic locations positions it well to meet the evolving needs of tenants and drive long-term value creation for shareholders.

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Abbott Labs (ABT)

  • Industry: Medical Devices
  • Market Cap: $184 billion
  • P/E: 21x Earnings

Company Overview

Abbott Laboratories, commonly known as Abbott, is a global healthcare company headquartered in Abbott Park, Illinois, United States. Founded in 1888, Abbott operates in various healthcare industry segments, including medical devices, diagnostics, nutrition, and pharmaceuticals.

The company’s diverse portfolio of products and services encompasses a wide range of healthcare needs, from diagnostics and medical devices to nutritional products and pharmaceuticals. Abbott’s innovative products and solutions are designed to help people live healthier lives and improve healthcare outcomes worldwide.

With a presence in more than 160 countries, Abbott serves millions of customers and patients worldwide, delivering cutting-edge technologies, diagnostic tools and healthcare solutions. The company is committed to advancing medical science, improving patient care, and addressing global health challenges through innovation and collaboration.

Why ABT Stock Is A Top Pick

Abbott earns its position as one of the top dividend stock picks due to its strong track record of dividend payments and commitment to shareholder returns. Abbott is a leading global healthcare company across multiple segments, including diagnostics, medical devices, nutrition and pharmaceuticals.

One key reason for Abbott’s appeal as a dividend stock is its consistent growth. The company has a history of increasing its dividend payout annually (up 52% since 2020), reflecting its confidence in its business model, financial strength and ability to generate sustainable cash flows.

Abbott’s diversified portfolio of healthcare products and services provides resilience and stability, even in challenging economic environments. The company’s focus on innovation, research, and development ensures a steady stream of new products and technologies that address evolving healthcare needs, driving revenue growth and profitability.

Abbott’s strong financial position and cash flow generation capabilities support its dividend payments and shareholder-friendly initiatives. The company’s prudent capital allocation strategy prioritizes investments in growth opportunities while returning capital to shareholders through dividends and share buybacks.

Abbott’s leadership position in key healthcare markets, its global presence and its established brand reputation help it capitalize on long-term trends in healthcare and deliver consistent returns to shareholders.

BlackRock (BLK)

  • Industry: Financial & Conglomerate
  • Market Cap: $117 Billion
  • P/E: 17x

Company Overview

BlackRock is the world’s largest asset management company, renowned for its global presence, diverse investment offerings and innovative financial solutions. Founded in 1988 and headquartered in New York City, BlackRock manages assets for institutional and individual investors worldwide, spanning a broad spectrum of asset classes, including equities, fixed income, alternatives and multi-asset strategies.

With operations in more than 30 countries, BlackRock offers a comprehensive range of investment products and services tailored to meet its clients’ diverse needs. These offerings include mutual funds, exchange-traded funds (ETFs), separately managed accounts and customized investment solutions to achieve specific objectives.

BlackRock’s success is built on its commitment to delivering superior investment performance, risk management and client service. The company’s investment teams leverage advanced analytics, technology, and research capabilities to identify investment opportunities and manage risk effectively across different market environments.

Furthermore, BlackRock is a leader in responsible investing and sustainability, integrating environmental, social and governance (ESG) factors into its investment processes and engaging with companies to promote sustainable business practices. The company is dedicated to driving positive social and environmental outcomes while delivering long-term value for its clients and shareholders.

Overall, BlackRock’s scale, expertise and commitment to innovation position it as a trusted partner for investors seeking to achieve their financial goals and navigate the complexities of global financial markets. With a strong focus on delivering value to clients and stakeholders, BlackRock continues to set the standard for excellence in asset management.

Why BLK Stock Is A Top Pick

BlackRock stands out as one of the top dividend stock picks for the remainder of the year due to its solid track record of dividend payments and strong financial performance. As the world’s largest asset management firm, BlackRock operates across various segments, including investment management, risk management and advisory services.

One key reason for BlackRock’s appeal as a dividend stock is its consistent and growing dividend payments. The company has a history of increasing its dividend payout annually, reflecting its confidence in its business model, financial stability and ability to generate sustainable cash flows.

BlackRock’s diversified business model and global presence provide resilience and stability, even in volatile market conditions. The company’s broad range of investment products and services caters to institutional and individual investors worldwide, offering exposure to diverse asset classes and investment strategies.

BlackRock’s strong financial position and robust cash flow generation capabilities support its dividend payments and shareholder-friendly initiatives. The company’s disciplined capital allocation strategy focuses on delivering value to shareholders through dividends, share buybacks, and strategic investments.

BlackRock’s leadership position in the asset management industry, scale, expertise and reputation position it well to capitalize on long-term trends in global financial markets. As investors increasingly seek professional investment management services and passive investment strategies gain popularity, BlackRock is poised to benefit from growing demand for its products and services.

For investors seeking stable income streams and exposure to the growth potential of global financial markets, BlackRock offers an attractive investment opportunity with the potential for both income and capital appreciation.

How These Dividend Stocks Were Picked

In crafting the selection of dividend stocks tailored to hedge against inflation, I searched for candidates capable of navigating inflationary pressures while delivering consistent returns. The methodology involved thorough evaluations across several critical criteria.

I looked at historical dividend growth, prioritizing companies with a proven track record of steadily increasing dividends over time. This criterion ensured that our selection included stocks with a demonstrated ability to maintain and enhance shareholder value amid changing economic conditions.

I also assessed financial stability, analyzing factors such as cash flow, debt levels and profitability. By focusing on financially sound companies with strong balance sheets and sustainable cash flows, I aimed to mitigate inflation-related investment risks.

I also considered industry resilience, favoring sectors known for weathering inflationary environments. Industries with pricing power, such as consumer staples, utilities and specific healthcare segments, were given particular attention due to their capacity to pass on increased costs to consumers.

I compared the dividend yields of selected stocks against prevailing inflation rates to ensure that the potential income generated from dividends outpaced inflation. This approach aimed to provide investors with a real rate of return that preserved purchasing power over time.

I assessed each company’s future growth prospects, considering market positioning, innovation, and strategic initiatives. By identifying stocks with promising growth trajectories, I aimed to offer investors the potential for capital appreciation alongside dividend income.

Applying this comprehensive methodology, I identified a select group of dividend-paying stocks poised to hedge against inflation while effectively delivering sustainable returns to investors.

Bottom Line

In an environment marked by rising inflation, investors seek refuge in assets that offer stability and growth. Dividend stocks emerge as a compelling option, known for their consistent payouts and potential for capital appreciation. My selection of the five best dividend stocks for hedging against inflation showcases companies with a history of increasing dividends, strong financial stability, and resilience across various industries. From Enterprise Products Partners’ robust performance in the energy sector to Coca-Cola’s global presence in consumer staples, these stocks offer a blend of reliable income streams and potential for long-term growth. Prologis, Abbott Labs and BlackRock round out the list with their solid track records, diverse portfolios and commitment to delivering value to shareholders. With careful consideration of historical dividend growth, financial stability, industry resilience and growth prospects, these dividend stocks present compelling opportunities for investors seeking to hedge against inflation while generating sustainable returns.

Frequently Asked Questions (FAQs)

Are dividend stocks good during inflation?

During inflation, dividend-paying stocks can provide a stable income stream, hedge against rising prices, preserve value, offer potential for capital appreciation and diversify a portfolio.

Do raising interest rates affect dividend stocks?

Rising interest rates can affect dividend stocks by making them less attractive than fixed-income investments like bonds. They can also lead investors to seek higher yields elsewhere, potentially causing a shift away from dividend-paying stocks. Additionally, higher interest rates can increase borrowing costs for companies, impacting their ability to pay dividends or maintain dividend growth.

Are dividend stocks risky to invest in?

Dividend stocks can carry risks like any investment but are not inherently risky. The level of risk depends on various factors, such as the company’s financial health, dividend payout ratio, industry trends, and market conditions. While dividend-paying stocks can provide regular income and potential for capital appreciation, investors should conduct thorough research and diversify their portfolios to mitigate risks.

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The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download Forbes’ most popular report, 12 Stocks To Buy Now.