Consider These Dividend-Paying Stocks During Inflationary Times
Inflation was higher than expected in May as rising food, energy and shelter costs pushed up prices. The year has seen high inflation, which could continue for several months. However, the Fed is slowly normalizing its policy and an inflationary environment will likely continue for a longer time. Many people worry about losing their purchasing power as inflation eats away at their savings. To protect their savings, investors may consider the following stocks to be a hedge for their portfolios. These stocks have a high price and a high dividend yield that can help consumers reduce inflation.
Four stocks you should consider:
AT&T (NYSE: T) AT&T is a company that provides a range of telecommunication services, including mobile and internet services, and is the largest telecommunications company in the United States. You might consider it a stock to add to your portfolio to weather the current inflationary climate. AT&T currently offers a yield of 5.3%, and trades at a moderate valuation of 8 price to earnings (P/E). Analysts expect earnings-per-share to rise by 8-10% for the year, which would make the current valuation relatively cheap compared to the broader market. Telecommunication companies also have some pricing power which would allow them to raise prices when inflationary pressures affect margins. AT&T should also reap the benefits of 5G as more customers abandon their 4G plans.
Kinder Morgan (NYSE: KMI) Kinder Morgan is an American midstream company that operates four segments: Natural Gas Pipelines, Product Pipelines, Terminals, and C02. The Natural Gas Pipelines segment operates and owns intra- and interstate pipelines, gathering and processing/treatment systems. The Product Pipelines segment deals with refined products. The Terminal segment deals with liquid and bulk terminals. The stock currently yields a dividend yield 5. 75% and has a forward P/E of 20. As natural gas demand continues to rise, midstream companies, particularly those who own storage and terminals for LNG should take advantage of the current environment.
It is important to note that higher energy prices do not directly affect Midstream companies. They rely more heavily on volume than price. The overall market should see a decrease in demand for oil as it recovers from the pandemic. However, this could have an impact on volume. Midstream companies are more stable than energy companies and have a higher risk of being affected by large price fluctuations.
Southern Copper Corporation (NYSE: SCCO): Southern Copper engages in mining, exploring, smelting, and refining copper. Copper prices are expected to continue rising in the current environment. South Copper will see higher earnings due to higher copper prices. Southern Copper has several mines around the globe, including in Chile, Argentina, and Mexico. Copper demand is still strong, and the industries that rely on it remain solid. While China’s demand remains a concern for many, the demand from the rest is steady. The stock currently trades at a forward P/E of 15, with a dividend yield of 8%. An 8% yield is quite generous considering the low interest rates and inflation. However, copper prices may fall and the dividend could be cut to a lower level. Southern Copper could be the stock that helps you hedge your portfolio in these times.
Manulife Financial Corporation (NYSE: MFC) Manulife provides various financial products in Asia, North America, and Worldwide. They have multiple segments, including Wealth Management, Insurance, Annuity Products and other Corporate Services. Manulife’s main segment is its insurance division. Insurance products are known for being resilient to inflation. Manulife trades at a modest 3.8 P/E and offers a 5.7% dividend yield. Although the insurance and wealth management industries are slow-moving, they should still benefit from the inflationary environment. Insurance is also resilient to economic downturns. Overall, the business is well-suited to the current climate.
Kinder Morgan is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.