Dividend Stocks Inflation: The 6 Best Ways to Cope With Inflation

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This great article on dividend stocks inflation was originally published by Sure Dividend. They gave us permission to republish the article here. You should read it alongside our posts on Dividend Aristocrats and Dividend Kings.

When you as an investor are looking at the earning opportunity, you can mull over the earning options offered by dividend investing.

A dividend allows you to enjoy your share of the company’s profit. Dividends are the total amount of money that a particular company pays to its shareholders.

The amount of dividend depends upon the performance of the company and the earnings made by it. It entirely depends upon the company’s prerogative to offer dividends to its shareholders.

Dividend investing is an excellent strategy that you can use to maximize your cash income generated from your equity investments.

If you can put an innovative and profitable dividend investing in place, you can earn income that can even surpass your income from the regular job you are engaged in.

And, if you are in debt, you can utilize the dividend proceeds to consolidate debt to become debt-free.

Here are a few tips for finding a successful dividend investing strategy. After this, I will share some best dividend stocks you can count on to beat Inflation.

Dividends are not Rights but Privileges.

It is to be kept in mind that dividends are not guaranteed; instead, they are more like privileges the shareholders enjoy.

It depends entirely upon the discretion of the company’s board of directors to issue dividends to the shareholders, given the condition that the company has scripted a solid financial performance.

Paying dividends to the shareholders shows the company’s financial strength and attracts income-minded investors to the company’s fold. Again, when a company cuts back the dividend amount, it is not doing well.

Be Skeptical About Unusually High Dividend Yields.

Do not expect to earn huge money with super-yield dividends. In fact, as a general rule, any dividend yield which is over two and a half times the broader market should be viewed skeptically.

It has been seen time and again that many stocks fared exceedingly well and fetched super returns and dividends to the shareholders during the bull phase but plummeted appreciably during the bear phase, offering no dividends at all to the shareholders.

This has been the case with many real estate investment trusts (REITs), with their stock prices receiving a severe beating during the bear phase.

Analyze the cash flow statement

To find a high-dividend stock, it is essential to analyze the cash-flow statement.

Check whether the company has the required cash to pay out the dividends or if it is resorting to debt or selling stock to finance the dividend payment.

If the company is selling stocks or resorting to debt to pay out the dividends to the shareholders, it can’t be said to be sustainable.

Follow the above-mentioned tips to find a successful dividend investing strategy and earn a lot of money.

6 Best Dividend Stocks to Fight Inflation

Dividends aren’t just lovely; they’re critical to the stock market’s performance, accounting for roughly 40% of total returns since 1930.

Remember, stocks that increased their dividends significantly outperformed the broad market on average during high inflation periods.

The regular, scheduled payments of dividend-paying stocks may also help reduce the volatility of a stock’s total return. Dividend stocks that increase their dividends faster than Inflation are one option for equity investors to examine.

Here is a list of six stocks that income investors should consider purchasing. Each company has excellent potential for capital gains, but it has also offered significant dividend increases each year to offset the impact of rising prices.

1. APA Corporation (APA)

APA is the holding company for Apache Corp., a Houston-based upstream oil and gas corporation.

APA has created a system that assures shareholders at least 60% of free cash flow through dividends and share repurchases, keeping a sector-wide focus on shareholder returns.

APA generated $1.3 billion in free cash flow in the first three quarters of 2021 and boosted its annualized dividend to 50 cents per share, a 100 percent increase from the prior level.

Furthermore, APA’s revenue increased by 84 percent year over year to more than $2 billion, and adjusted net income increased to $372 million in the fourth quarter.

2. Dividends from Camping World Holdings (CWH) travel well.

Camping World Holdings is the country’s leading retailer of recreational vehicles (RVs).

It sells and maintains new and old RVs and their parts and accessories. Camping World saw a surge in revenue during the pandemic as families sought safer vacation options.

While Camping World’s stock has lost 30% this year, the company’s business hasn’t decreased, even as COVID-19 instances have declined.

With a price-to-earnings (P/E) ratio of 4.46, compared to the auto and truck industry’s average of 55.50, the price reduction has made the company a better purchase.

3. NextEra Energy (NEE)

The Dividend Aristocrats have recently welcomed NextEra Energy (NEE). In January 2021, the utility joined an exclusive group of dividend growers. Florida Power & Light (FPL), Florida’s largest electric utility, and NextEra Energy Resources, a prominent participant in wind and solar energy, are the company’s two main businesses.

This mix of a strongly regulated utility and a rapidly developing renewables company appeals to analysts.

The corporation should benefit from population expansion and the Biden administration’s focus on renewable energy. In February 2022, the firm increased its quarterly dividend by 10.1 percent to 42.5 cents per share.

4. The Boise Cascade Company (BCC)

Boise Cascade’s stock has risen more than 40% in the last six months, during which time it has also increased dividends.

The company’s two segments are wood products and building materials distribution, or BMD, accounting for 79 percent of sales.

Boise Cascade is North America’s second-largest producer of engineered wood products and plywood.

Wood product revenue increased 85 percent year over year to $122 million in the third quarter of 2021, owing to more excellent prices and volumes, but BMD revenue fell 85 percent to $16.6 million. BCC pays a 12 cents-per-share quarterly dividend and paid out $5 in supplemental dividends last year.

5. Caterpillar (CAT)

In January 2019, Caterpillar, the world’s largest heavy construction and mining equipment manufacturer, joined the Dividend Aristocrats. Since 1933, CAT has paid a consistent dividend and has increased it every year for the past 27 years.

The corporation increased the dividend by 8% to $1.11 quarterly in June 2021. The best dividend stocks have enough free cash flow to cover the dividend, and CAT easily meets this requirement.

CAT reported $7.0 billion in free cash flow after debt payments and $2.3 billion in dividends for Dec. 31, 2021.

6. Exxon Mobil Corporation (XOM)

Energy is the market’s best-performing sector, with the S&P 500 Energy Index rising over 55 percent in the last year. West Texas Intermediate crude has increased more than 30% in the previous six months.

Outsized demand and a lack of supply have driven prices higher, allowing companies to earn more money while maintaining costs, resulting in better margins and profits.

Exxon Mobil’s upstream sector, which searches for and produces crude oil and natural gas, reported a 54 percent increase in fourth-quarter earnings to $6.1 billion, with $2.2 billion of that gain attributed to higher realized prices.

Exxon generated $48 billion in operating cash flow in 2021, which was more than adequate to satisfy scheduled debt repayments, investment projects, and shareholder capital returns. Exxon returned $3.8 billion to shareholders last quarter through its 88-cent quarterly dividend.

Conclusion on Dividend Stocks Inflation

To design a successful dividend investing strategy, you should have good knowledge about the dividend market.

To find a high dividend investing strategy, you can check out the historical dividend performance of various companies.

However, past good performance does not ensure robust future performance. Instead, you have to find fundamentally undervalued solid stocks at the current time to frame a successful dividend investing strategy.