4 Perfect Dividing Stocks That Will Help You Crush Inflation

In case you haven’t noticed, most of the things we buy are getting more and more expensive. While it’s perfectly normal for prices to rise over time in an expanding economy, the pace at which prices have risen over the past year raises some eyebrows – and not in a good way.

According to data released last month by the U.S. Bureau of Labor Statistics, the consumer price index for all urban consumers (CPI-U) rose 5.4% in June from the last year. It was the highest 12-month jump in almost 13 years. In addition, the core CPI, which takes into account a predetermined basket of goods and services, less food and energy, increased 4.5%. This is the largest 12-month increase since November 1991.

One of the smartest ways for investors to counter the effects of inflation is to use dividend-paying stocks. Since companies that pay a dividend are often profitable and have proven operating models, they can put money in the pockets of investors through their payment and the appreciation of their stock prices over time.

If you are looking for the right dividend paying stocks to add to your portfolio, I would suggest the following four as perfect for helping you crush inflation.

Bristol Myers Squibb: 2.9% return

With the substantial amount of capital devoted to research and development, we don’t often view healthcare stocks as prime-time dividend payers. However, the pharmaceutical stock Bristol Myers Squibb (NYSE: BMY) brings the perfect blend of value and income (almost 3% return) to the investor table.

Bristol Myers’ growth story is partly organic growth and partly a large-scale acquisition. Organic side, Bristol and development partner Pfizer have seen Eliquis become the world leader in oral anticoagulants. Eliquis is currently on track to generate over $ 10 billion in sales for Bristol Myers this year. There’s also the cancer immunotherapy Opdivo, which generated $ 7 billion in revenue last year and is being investigated in dozens of ongoing clinical studies. Expansion of the label is highly likely at this point, which could push Opdivo’s sales even higher.

On the acquisition side, Bristol Myers caused a stir with the takeover of cancer and immunology drug maker Celgene in November 2019. Celgene’s flagship multiple myeloma treatment Revlimid increased sales by a percentage double digit for over a decade and has benefited from label expansion, increased shelf life and strong pricing power. Revlimid topped $ 12 billion in sales last year and is protected from a full onslaught of generic competition until the end of January 2026.

With constant profitability, a drug portfolio insensitive to economic activity (i.e. on all fronts.

Duke Energy: 3.7% yield

One of the safest ways to fight inflation would be to invest your money in stocks of electric utilities. Duke Energy (NYSE: DUK), the country’s second-largest utility by market capitalization, is the perfect example of dividend-paying stocks that can deliver to its shareholders.

Traditionally, electric utilities have been slow growing businesses that perform above average. Where Duke Energy aims to differentiate itself from most of its competitors is in the growth department. The company plans to spend a total of $ 58 billion to $ 60 billion in capital spending between 2020 and 2024, most of which will include clean energy projects. Between 2025 and 2029, CapEx is expected to reach $ 75 billion. While investing in renewables doesn’t come cheap, historically low lending rates, coupled with lower power generation costs, will help boost Duke’s organic growth rate.

Beyond these significant investments in renewable energy, Duke Energy also benefits from its traditional utilities, that is, those that are not powered by green energy sources. Since electricity is a basic service for homeowners and tenants, demand does not fluctuate much from year to year.

Additionally, since its traditional utilities are regulated by state-level utility commissions, the company is not exposed to potentially volatile wholesale electricity prices. In short, Duke’s cash flow is very predictable, which allows for great transparency when it comes to deciding its capital spending.

IBM: 4.6% return

There is no wrapping up that the backbone of technology IBM (NYSE: IBM) has lagged behind its peers over the past decade. The company’s late entry into cloud computing resulted in modest revenue declines for more than half a decade. But after years of redesign, IBM’s turnaround is finally taking shape.

The biggest nod for IBM is that it delivers both organic and acquisition-driven growth on the cloud front. In the quarter ended in June, IBM reported $ 7 billion in cloud revenue, which is a 13% increase from the previous year period. As a percentage of total quarterly sales, the cloud now accounts for 37% of revenue. Since cloud margins are significantly higher than all legacy IBM operations, the company’s operating cash flow is expected to grow at a faster rate than sales for the foreseeable future.

It should also be noted that IBM’s hybrid cloud approach – solutions combining public and private clouds, which allow transparent sharing of data between these respective services – fits perfectly with the hybrid working environment that has arisen at the aftermath of the pandemic. In addition to being very effective in helping companies facing big data projects, the hybrid cloud is designed to allow companies to have remote workforce.

While it will still take some time before IBM’s revenue growth picks up on an organic basis, there will be more than enough cash flow to lock in its 4.6% return.

Annaly Capital Management: 10.5% return

Now, if you really want to put inflation in its place and you want dividend payouts to do most of the work, the ideal stock to buy is Mortgage Real Estate Investment Trust (REIT). Annaly Capital Management (NYSE: NLY). Annaly has averaged a return of around 10% over the past two decades and has paid over $ 20 billion in dividends since its inception.

Mortgage REITs are interest rate sensitive companies that aim to purchase assets that will maximize their net interest margin. Annaly, for example, borrows money at lower short-term borrowing rates and uses it to buy mortgage-backed securities that have higher long-term yields. By subtracting the borrowing rate from the long-term average return, we arrive at the net interest margin. As you can imagine, the larger the net interest margin, the more potential Annaly has to generate profit.

Typically, mortgage REITs perform worst when the bond yield curve flattens and / or when the Federal Reserve quickly adjusts monetary policy. On the other hand, when the yield curve steepens and / or the country’s central bank telegraphs its monetary policy moves, mortgage REITs outperform. We are currently in the latter scenario, with a rebound in the US economy often conducive to a steepening of the yield curve.

Finally, remember that Anna almost exclusively buys agency titles. The agency’s assets are guaranteed by the federal government in the event of default. As you can probably imagine, this added protection reduces the long-term return that Annaly achieves. However, it also allows the business to deploy leverage to increase its profit potential.

Annaly Capital Management is arguably the safest ultra-high yielding dividend stock on the planet.