Best Dividend Stocks To Beat Inflation In 2023

With a year of economic uncertainty ahead, securing your portfolio is a smart choice.

2023 might be called the year of personal financial uncertainty. There are potential recessions, inflation in the prices of goods and services, and questions about what the Federal Reserve will do with interest rates. The near-term performance of stocks, exchange-traded funds (ETFs) and fixed-income assets is uncertain.

How do you manage your portfolio in response to uncertainty? Consider dividend stocks. Dividends provide extra cash, and while extra money doesn’t completely solve the effects of inflation, it does lessen the pain.

R. Burns McKinney, Managing Director and Senior Portfolio Manager, NFJ Investment Group, said: The first is that dividend stocks act like “short-term money market instruments.” Instead of waiting for some time in the future like high-growth tech stocks, you have cash you can reinvest today.

Second, companies that pay dividends can often outperform fixed-income securities such as corporate bonds and government bonds because they can often increase their payments faster than inflation.

Which stock or ETF is best for you ultimately depends on your particular investor’s risk tolerance and investment horizon. “In this kind of environment, it’s not enough to just target the companies that currently offer the highest dividend yields,” said Daniel Dusina, investment director at Blue Chip Partners. “As inflation and tighter financial conditions hit companies, investors need more certainty that their profitability and, ultimately, their ability to pay attractive dividends will not be compromised.”

Factors to consider include a company’s stability, history of dividend payments to demonstrate credibility, dividend yields, trends in financial performance, the defensibility of the business’ industry position, equity or ETF valuations, and risk. there is. Here are the dividend-paying stocks and ETFs that independent financial adviser Forbes suggested they particularly liked. Data and figures quoted are at the time of publication.

Inflation, even at low levels, destroys wealth, but at current interest rates it is deadly. Protect yourself with dividend stocks that raise payouts faster than inflation. Click here to download Forbes’ special report, 5 Dividend Stocks to Beat Inflation.

Digital Reality (DLR)

i like mckinney digital reality, a real estate investment trust and “the largest owner of data centers”. REITs generally own income-generating properties such as office buildings, retail centers, rental housing, medical clinics, hotels, and self-storage facilities. In this case, the real estate asset is the data center, essential to modern business operations. By law, REITs must pay at least 90% of their taxable income as shareholder dividends.

Digital Realty, like most REITs, trades on the New York Stock Exchange, averaging about 1.8 million shares per day over the past 12 months, according to data from S&P Global Market Intelligence. With so much trading activity, liquidity is not an issue.

Digital Realty’s current dividend yield is 4.5%, McKinney says it has “favorable cost and scale” and is trading at “significant discounts to similar names.”

Advanced Auto Parts (AAP)

There are hundreds of millions of cars in the US, the country is car obsessed, someone needs to sell the parts to keep all these cars on the road, a market value of about $300 billion a year . Robert Kalman, co-founder and senior portfolio manager at Miramar Capital, said: advance auto parts Good location. With a current dividend yield of over 4% for him, the company still has his $1.3 billion share buyback plan, which should help the stock price rise.

“A slowing economy and a higher [interest rates on car purchases] This means people keep their cars longer,” says Kalman. “Acquisition of die-hard battery brands [in 2019]has led the company to “invest in electric and hybrid vehicles,” with annual sales exceeding $1 billion.according to wall street journal The business is on a high growth trajectory as fully electric vehicles moved from 3.2% of total vehicle sales in 2021 to 5.8% in 2022, according to analysis.

Snap-on (SNA)

Another company with automotive roots to consider is snap onYou may have seen trucks being moved from one facility to another for a company that sells directly tools and diagnostic equipment used by professionals in the automotive, heavy equipment, marine, aviation and rail industries. I can’t. Continued growth is underpinned by an increase in the number of used cars on the street and new activity in the Supply He chain, which includes the last three categories.

Telemus Chief Investment Officer Matt Dmytryszyn said: “Free cash flow was typically twice his dividend paid. This puts him now comfortable with Snap-On’s ability to cover and grow its current dividend equivalent to a 2.6% yield. I have.”

Cisco Systems (CSCO)

Tech was one of the worst investment destinations in 2022, but looking for bargains has seen the sector make a respectable comeback in the first three weeks of January.Networking and communications giant Cisco Systems is a dominant name in the tech space and has some attractive characteristics as a dividend-paying stock.

“The company currently offers a dividend yield of 3.1%, higher operating margins than its peers, and a free cash flow yield above the US large-cap market of 83%,” says Dusina. The company has more cash than debt on its balance sheet and remains in a “sound financial position,” and on average over the past decade, the company has increased its annual dividend by more than 10%. increase.

Aside from being positioned in the work-from-home trend, “the recently initiated shift to more combined software and subscription sales has increased customer switching costs, resulting in lower customer retention rates. And recurring revenue will improve, but this is the current market.”

Inflation, even at low levels, destroys wealth, but at current interest rates it is deadly. Protect yourself with dividend stocks that raise payouts faster than inflation. Click here to download Forbes’ special report, 5 Dividend Stocks to Beat Inflation.

Mix Telematics (MIXT)

Speaking of technology, mixed telematics is unlikely to be the first name that comes to mind, but as one of the largest players tracking vehicle fleets, it occupies a significant place in how technology supports global supply chains. I’m here. Industries served include oil and gas, construction, utilities, supply chain, mining, public transportation and agriculture.

Randy Barron, Lead Portfolio Manager at Pinnacle Associates said: “Subscribers are growing in his double-digit range, the company has a solid backlog, and interestingly, MIXT has repurchased more than one-third of his shares outstanding since going public. I got it.” As such, management is trying to keep the stock price high. In the fall of 2022, an investment group of activists suggested that in auction conditions the stock could be worth twice as much as he is at current market levels.

Pinnacle Associates has held positions in South African companies for five years via US traded American Depositary Receipts. The dividend yield is 3.1%.

ExxonMobil (XOM)

ExxonMobil, one of the largest US companies with a market capitalization of $471 billion, can also help cushion the fallout from inflation.

“It’s one of the few stocks that has paid dividends for over 100 years,” said Kimberly Birn, owner of Birn Financial. Shareholder. Exxon has also increased its dividend every year for more than 40 years, making him one of the few oil companies to qualify as a Dividend Aristocrat.

The company has a 30% return on equity, “significantly higher than the industry average,” and has increased its dividend every year for the past 30 years. Exxon also has a diverse portfolio of oil, gas and other energy products, including significant investments in renewable energy sources.

Cisco (SYY)

Just as companies that provide essential human needs for warmth, energy and shelter, companies that provide food have a market ready for their commodities. Cisco According to Ryan P. Johnson, managing director of investments at Buckingham Advisors, it is “the world’s largest distributor of food and related products to the foodservice and on-the-go food industries.”

Approximately 71% of Sysco’s revenue comes from its domestic foodservice operations, 17% from overseas and 11% from its ownership of Sygma Network, which serves chain restaurants. The company’s 190 U.S. distribution centers provide the competitive advantage of getting the right food to the right place at the right time. Management plans to expand the business faster than the industry as a whole in the next few years by increasing ordering and delivery flexibility.

“Valuations are relatively attractive in some metrics, trading at a slight discount to the sector, but often at a premium,” Johnson said in February. The 2.4% dividend yield is likely to rise.

iShares International Select Dividend ETF (IDV)

Dr. Richard Michaud, President and CEO of Frontier Advisors, tells investors to focus more on dividend ETFs than on individual stocks. Increased diversity and stability due to exposure to a wider market. “The best advice for sustained high income is to use an optimized multi-asset portfolio of ETFs and manage your entire portfolio for that goal,” he said.

he suggests that iShares International Select Dividend ETF (IDV), with a current yield of 7.3%, “includes about 100 high-dividend stocks from 20 countries that most investors find difficult to access individually.”

Schwab US Dividend Stock ETF (SCHD)

Another ETF worth considering is Schwab US Dividend Stockwhich is designed to track as closely as possible the total return of the Dow Jones US Dividend 100 Index before fees and expenses.

“This is a large value ETF, so I use it in most of my investment portfolios. It currently has a very good dividend yield of 3.4%.” A very low cost of 0.06% per year.”

Do you know…?

Since 1930, dividends have provided 40% of total stock market returns. What’s even more impressive (and lesser known) is that its outsize impact is even greater during inflationary periods, making him an impressive 54% of shareholder returns. If you’re looking to add quality dividend stocks to hedge against inflation, The Forbes investment team found five companies with strong fundamentals that continue to grow when prices are soaring. Download the report here.

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