Dividend growth stocks can be a great way to fight inflation
The dividend growth strategy is undoubtedly one of the most popular approaches to investing. It’s about buying and owning stocks of quality, dividend-paying companies that grow their cash flow enough each year to consistently increase their payouts to shareholders. One of the main reasons that dividend growth investing has such a good reputation with investors is that it actually works. Owning a diversified portfolio of companies that grow their payouts at a steady rate can help investors build substantial long-term wealth, especially if they decide to reinvest dividends in more stocks over the years.
Dividend-paying stocks still attract a fair share of buyers in almost any market environment, but this year these types of investments are more attractive than ever thanks to lingering inflation concerns. Finding assets that can help you fight inflation is certainly not easy due to the number of questions surrounding the economy and whether or not the Federal Reserve can get things under control quickly. That’s why we’ve put together the following list of 3 dividend growth stocks to help you fight inflation. Here are a few reasons these companies stand out as great long-term buys.
A particularly important detail about dividend growth investing is that it is very important to select companies with strong business prospects and reliable free cash flow generation. That way, you can probably count on them to keep rewarding long-term shareholders with growing payouts. This is a big reason why FedEx Corporation (NYSE:) should be on your radar, especially since the stock has been hammered this year and could be a great buying opportunity. FedEx is a premier company that provides express and ground parcel services to homes and businesses around the world, as well as truck freight and logistics services.
We know FedEx is going to stay busy over the next decade thanks to the tailwinds of e-commerce, and the company’s vast international shipping network is both impressive and very difficult for competitors to imitate. While it’s true that FedEx faces higher employee costs in the near term, it’s hard to argue against adding shares of an industry-leading company at such an attractive valuation. FedEx currently trades at a forward price-to-earnings ratio of 9.9, and the company’s management recently increased its dividend by 15%, two good reasons to consider adding shares. The stock is down more than 21% year-to-date, but according to MarketBeat consensus analyst estimates, the stock is more than 48% up from current levels given the target average price of $302.52, making it a very attractive option to consider.
Investors obviously have a lot to think about this year due to all the complicated factors happening around the world, so keeping things simple can be a good approach to the markets right now. Case in point – AmerisourceBergen (NYSE:) was one of the biggest market outperformers in 2022, won’t be significantly affected by the current geopolitical turmoil and has continued to increase its forecast, which likely means stocks are expected to continue its upward trend. It’s one of the nation’s largest pharmaceutical distributors with more than $210 billion in annual U.S. drug distribution revenue and a company investors can likely count on for continued dividend growth for years to come. coming.
Investors probably recognize how massive the pharmaceutical industry is, and the fact that Amerisource is one of the big three companies operating as a pharmaceutical wholesale and distribution oligopoly is another selling point to take. into account. With a 10-year dividend growth rate (CAGR) of 13.9%, investors should certainly be compelled to put capital into this leading long-term company. The fact that it’s in a sector that has significantly outperformed the market this year makes it an even more intriguing option, so keep an eye out for pullbacks if you want to add stocks.
The energy sector has been nothing short of impressive this year, which makes a dividend-growing stock like Kinder Morgan (NYSE:) all the more attractive. It is one of the largest energy transmission and storage companies in North America, which is important given the sanctions against Russia right now. Whether transporting, storing or processing natural gas liquids and more, it’s safe to say that Kinder Morgan plays a key role in the economy and has a successful business model. which should help investors feel confident about continued dividend growth.
The stock currently offers a dividend yield of 5.68% and some analysts anticipate the resumption of a share buyback program this year, which are certainly good reasons to consider adding shares. Investors should also be happy to learn that Kinder Morgan has paid off more than $12 billion in debt since 2015, freeing up plenty of capital to support earnings and dividend growth going forward.