If you’ve followed this series for a while, you know I’m a dividend guy.
I am discussing companies that pay their investors through dividends for several reasons.
They benefit portfolios in calm markets, but they can also help in tough times.
in today’s Investment with CharlesResearch analyst Matt Clark and I dive into using dividend-paying stocks to offset inflation.
Watch our latest video below or keep scrolling for the highlights.
How Dividends Help You Fight Inflation
slows down: Today we are talking about two topics that are not necessarily related: inflation and dividends.
We hear about inflation in the financial news and mainstream media all the time now.
But the question I have for you today revolves around dividends.
Is there a way to use dividend paying stocks to help beat rising inflation?
slows down: OK.
Charles: This is the answer.
slows down: Can you expand?
Charles: Let’s start at the beginning: what is inflation?
Inflation is an increase in prices, meaning your expenses. When your expenses go up, you need your income to go up or fall behind.
Dividends can help if you focus on companies that raise their payouts and have a good history of raising them.
I will give one good example: Microsoft Corp. (Nasdaq: MSFT).
Dividend Stock No. 1 Workhorse: Microsoft
Charles: Microsoft is not a company you think of as a dividend stock. Yes, it pays dividends. It has paid dividends since 2003, but it has never been a high yielding company.
But Microsoft has been one of the dividend-raising workhorses over the past 20 years here. It raised that dividend like clockwork – and by a good amount.
Charles: She increased this dividend by about 10% per year on average. There are years a little more, there are years a little less, but it’s about 10%.
We have 9% inflation right now.
You’re not ahead of inflation on this one.
But I believe that 9% inflation will not be with us forever. This is a temporary blip.
I think normal inflation will be a little higher than what the Fed wants, which is 2%.
The average we should expect for the next two years may be something like 4% or 5%.
But if you get a stock like Microsoft in your portfolio, it should cover inflation and more.
It’s not a super high yield, but the dividend growth keeps you ahead of inflation.
slows down: If you look at 2010, Microsoft paid an annual dividend of $0.52 per share.
In 2022, this dividend is expected to be approximately $2.48 per share.
Charles: Matt, another point is that Microsoft may not be super high yielding today – it’s yielding just under 1%.
But if you look at dividend growth, we touched on the concept of Return on cost a few weeks ago.
This is an important idea to return to here.
No matter what you start with, at whatever price you lock in today, if it increases that dividend by 10% a year, you’re looking at a pretty good return on your original cost after a few years.
Dividend Stock Workhorse #2: Real Estate Income
slows down: Microsoft is not alone.
There are a lot of dividend payers out there.
I know you have a favorite. And that’s it Realty Income Corp. (symbol: O)REIT (Real Estate Investment Trust).
And it’s a company you’re madly in love with.
Talk about it a little.
Charles: Yes. My feelings for this stock are such that my wife is jealous.
I’m kind of kidding. I love real estate income for many reasons.
Find out more about these reasons by watching today’s video.
where to find us
Don’t forget to check out our new build Ask us anything A video series where Adam, Matt and I answer your investing questions.
You can also catch Matt every week on his Marijuana market update. If you’re into cannabis investing, you don’t want to miss his weekly insights.
Remember, you can email my team and me at Feedback@MoneyandMarkets.com – or leave a comment on YouTube. We love hearing from you! We may even feature your question or comment in a future edition of Investment with Charles.
to ensure profits,
Charles Sizemore, Associate Editor, Green Zone Fortunes
Charles Sizemore He is the joint editor of Green Zone Fortunes and specializes in income and retirement issues. He is also a frequent guest on CNBC, Bloomberg and Fox Business.
Fight Inflation With Dividend Stocks — 2 Companies Prove Growth Is Key Source link Fight Inflation With Dividend Stocks — 2 Companies Prove Growth Is Key