In this article, we discuss the 10 best dividend stocks for inflation.
The current market situation is intense, and could potentially worsen with further rate hikes as warned by the Fed. Although most sectors tend to perform poorly in high and rising inflation environments, there are certain areas that have historically performed better. Based on the research conducted by the investment advisory firm Hartford Funds, some of the winning sectors during times of surging inflation include Energy, Consumer Staples, Equity REIT, Utilities, and Precious Metals & Mining.
This is where dividend stocks come in. According to research from Goldman Sachs, during periods of high inflation (greater than 5%), dividend stocks tend to do better than the wider market. With that in mind, investors looking to safeguard their investments from inflation would do well to look into high-yield dividend stocks for their portfolios. Some of the most prominent gainers from inflation include Devon Energy Corporation (NYSE:DVN), Altria Group, Inc. (NYSE:MO), and AT&T Inc. (NYSE:T), among others listed below.
Photo by Vitaly Taranov on Unsplash
Our Methodology
To determine the 10 best dividend stocks for inflation, we looked for companies that belong to sectors that tend to remain resilient against inflation, while picking stocks that have a high dividend yield. Additionally, we have provided analyst ratings to provide more insight into the companies.
The hedge fund sentiment was derived from Insider Monkey’s Q1 2022 database which tracks more than 900 elite hedge funds.
Best Dividend Stocks For Inflation
10. Exxon Mobil Corporation (NYSE:XOM)
Number Of Hedge Fund Holders: 83
Dividend Yield as of June 24: 4.05%
Exxon Mobil Corporation (NYSE:XOM) is an American multinational oil and gas corporation that is involved in the production, transportation and sale of crude oil, natural gas, petroleum products and other petrochemicals around the globe. A profitable investment option for investors given the current market situation, Exxon Mobil Corporation (NYSE:XOM) has recorded 39 years of consistent dividend increases. The stock has gained 64.6% since the beginning of 2022.
Exxon Mobil Corporation (NYSE:XOM) currently offers a quarterly payout of $0.88 per share, with a dividend yield of 4.05%, as of June 24.
On June 21, Credit Suisse analyst Manav Gupta upgraded Exxon Mobil Corporation (NYSE:XOM) to Outperform from Neutral with a price target of $125, up from $115. According to Gupta, the company has continued to invest in some of the most attractive oil and gas projects while many global majors significantly cut back on investments globally. He adds that Exxon Mobil Corporation (NYSE:XOM)’s differentiated growth strategy will deliver “excellent returns for its investors” post the Russia-Ukraine conflict.
As per Insider Monkey’s database for Q1, Exxon Mobil Corporation (NYSE:XOM) experienced growth in hedge fund positions, as 83 elite funds owned stakes in the company, up from 71 in the previous quarter. The consolidated value of these stakes is over $8.5 billion. Rajiv Jain’s GQG Partners is the company’s biggest shareholder, with a stake worth over $4.2 billion.
Similar to Devon Energy Corporation (NYSE:DVN), Altria Group, Inc. (NYSE:MO), and AT&T Inc. (NYSE:T), Exxon Mobil Corporation (NYSE:XOM) provides investors decent protection against inflation.
Saturna Capital mentioned Exxon Mobil Corporation (NYSE:XOM) in its Q4 2021 investor letter. Here is what the firm has to say:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
9. Realty Income Corporation (NYSE:O)
Number Of Hedge Fund Holders: 22
Dividend Yield as of June 24: 4.29%
Realty Income Corporation (NYSE:O) is a real estate investment trust that invests in free-standing, single-tenant commercial properties in the United States, Spain and the United Kingdom. The company has a portfolio of over 11,200 commercial real estate properties that are leased to over 1090 clients under long-term net lease agreements. One of the most prominent monthly dividend-paying stocks, Realty Income Corporation (NYSE:O) has raised its dividend 115 times throughout its 53-year operating history.
On June 22, Credit Suisse analyst Tayo Okusanya initiated coverage of Realty Income Corporation (NYSE:O) with an Outperform rating and $75 price target, also naming the stock among his Top Picks. The analyst cited the company’s ability to “narrow the valuation discount gap through portfolio rationalization and value-enhancing reinvestments.”
For the fiscal first quarter of 2022, Realty Income Corporation (NYSE:O) reported an EPS of $1.01, beating estimates by $0.04. Additionally, the revenue came in at $807.34 million, an increase of 93.29% on a year-over-year basis, surpassing market predictions by $58.66 million.
Realty Income Corporation (NYSE:O) raised its monthly dividend by 0.2% to $0.2475 per share on June 14. The dividend is payable on July 15 to shareholders of record on July 30.
Based on Insider Monkey’s Q1 database, 22 hedge funds were bullish on Realty Income Corporation (NYSE:O), down from 30 funds in the preceding quarter. The total stakes held in Q1 2022 amounted to approximately $284.8 million. Matthew Barrett’s Glendon Capital Management is the largest shareholder of the company, with a position worth roughly $128.68 million.
8. International Business Machines Corporation (NYSE:IBM)
Number Of Hedge Fund Holders: 43
Dividend Yield as of June 24: 4.65%
International Business Machines Corporation (NYSE:IBM) is a New York-based technology company that provides a wide range of hardware and software services to consumers. One of the highest yielding technology dividend stocks from the S&P 500 list, the company has four core business segments – Software, Consulting, Infrastructure, and Financing.
Earlier this April, Morgan Stanley analyst Erik Woodring raised the price target on International Business Machines Corporation (NYSE:IBM) to $157 from $150 and maintained an Overweight rating on the shares after what he calls a “relatively clean quarter.” According to the analyst, the company’s stronger calendar year 2022 revenue outlook reflects improving execution and a constructive IT market backdrop, and adds that he is “incrementally more constructive” after two consecutive quarters of outperformance.
International Business Machines Corporation (NYSE:IBM) has paid uninterrupted dividends to shareholders since 1916 and maintains a 27-year track record of dividend growth. Currently, the company pays a quarterly payout of $1.65 per share, with a yield of 4.65%, as of the close of June 24.
Among the hedge funds tracked by Insider Monkey, 43 funds reported owning stakes in International Business Machines Corporation (NYSE:IBM) at the end of March 2022, compared to 44 funds in the preceding quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held one of the leading positions in the company, with 4.46 million shares worth $579.89 million.
Here is what St. James Investment Company has to say about International Business Machines Corporation in its Q4 2021 investor letter:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties, and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
7. Philip Morris International Inc. (NYSE:PM)
Number Of Hedge Fund Holders: 55
Dividend Yield as of June 24: 4.84%
Philip Morris International Inc. (NYSE:PM) is a Swiss-American multinational cigarette and tobacco manufacturing company, with products sold in over 180 countries. As of Q1 2022, Philip Morris International Inc. (NYSE:PM) reports revenues of $7.75 billion, surpassing estimates by $320 million. The company’s smoke-free products accounted for 31.2% of its gross revenue.
On June 17, Philip Morris International Inc. (NYSE:PM) declared a quarterly payout of $1.25 per share, in line with the previous dividend. The company has been raising its dividend every year since its IPO in 2008. The stock’s dividend yield stood at 4.84% on June 24.
Earlier this April, BofA analyst Lisa Lewandowski raised her price target on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and maintained a Buy rating on the shares of the company. Despite certain challenges in 2022, the analyst expects Philip Morris International Inc. (NYSE:PM) to pivot its focus to other high potential markets and work through the temporary cost pressures of shifting production away from Russia. Additionally, the analyst likes the company’s attractive yield, strategy to shift smokers to higher margin, and less harmful smoking alternatives.
Among the hedge funds tracked by Insider Monkey in Q1 2022, 55 funds reported owning stakes in Philip Morris International Inc. (NYSE:PM) worth $6.6 billion, compared to 47 funds in the prior quarter, holding stakes in the company valued at $6.1 billion. Terry Smith’s Fundsmith LLP is one of the biggest position holders in Philip Morris International Inc. (NYSE:PM), with 16.45 million shares worth $1.54 billion.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm had to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
6. Verizon Communications Inc. (NYSE:VZ)
Number Of Hedge Fund Holders: 69
Dividend Yield as of June 24: 5.02%
Verizon Communications Inc. (NYSE:VZ), commonly known as Verizon, is an American multinational telecommunications conglomerate that offers data and video services across its networks and platforms. One of the most notable stocks when it comes to market uncertainty, the company maintains a 14-year track record of consistent dividend growth. As of June 24, the stock’s dividend yield came to be recorded at 5.02%.
On June 22, RBC Capital analyst Kutgun Maral lowered the price target on Verizon Communications Inc. (NYSE:VZ) to $54 from $57 and kept a Sector Perform rating on the shares. The analyst updated his model to reflect the impacts of recent price increases across both the Consumer and Business segments, as well as a more conservative approach through 2023 given the current macro environment. In a note to investors, the analyst states that Verizon Communications Inc. (NYSE:VZ)’s track record of execution and resilient business model position it well for the current period of uncertainty.
At the end of March 2022, 69 hedge funds tracked by Insider Monkey owned a $4.12 billion worth of stake in Verizon Communications Inc. (NYSE:VZ). In comparison, 63 hedge funds held positions in the company in the previous quarter, with stakes valued at over $10.8 billion. Ken Fisher’s Fisher Asset Management was the company’s leading stakeholder in Q1.
Just like Devon Energy Corporation (NYSE:DVN), Altria Group, Inc. (NYSE:MO), and AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) provides stable dividends to its shareholders.
Weitz Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q4 2021 investor letter. Here is what the firm had to say:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
5. AT&T Inc. (NYSE:T)
Number Of Hedge Fund Holders: 74
Dividend Yield as of June 24: 5.29%
The world’s largest telecommunications company and the largest provider of mobile telephone services in the United States, AT&T Inc. (NYSE:T) is an American multinational telecommunications holding company based in Dallas, Texas, that offers wireless voice and data plans, cloud solutions, different kinds of telephony services, and cloud solutions. The company currently offers a quarterly dividend of $0.2775 per share, with a dividend yield of 5.29%, as of June 24.
On June 16, Tigress Financial analyst Ivan Feinseth lowered the price target on AT&T Inc. (NYSE:T) to $28 from $31 and maintained a Buy rating on the shares. According to the analyst, his target drop accounts for the WarnerMedia spin-off as AT&T Inc. (NYSE:T) pivots back to its communication focus. He adds that the company’s subscriber growth and “resilient” business model will continue to drive increasing cash flow and long-term shareholder value creation.
AT&T Inc. (NYSE:T) reported earnings for Q1 2022 on April 21, posting an EPS of $0.77, above market estimates by $0.08. The $38.11 billion revenue also outperformed Street consensus estimates by $8.68 billion. Shares of the company rose after these results surpassed expectations, with the latest performance being partly attributed to the aggressive expansion of its 5G services.
At the end of March 2022, AT&T Inc. (NYSE:T) remained popular among elite funds, as 74 hedge funds tracked by Insider Monkey reported owning stakes in the company, up from 70 in the previous quarter. These stakes hold a total value of more than $4 million. Among these funds, Arrowstreet Capital was the leading stakeholder of the company in Q1.
Weitz Investment Management mentioned AT&T Inc. (NYSE:T) in its Q4 2021 investor letter. Here is what the firm has to say:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
4. Enbridge Inc. (NYSE:ENB)
Number Of Hedge Fund Holders: 24
Dividend Yield as of June 24: 6.44%
Enbridge Inc. (NYSE:ENB) is a multinational pipeline company headquartered in Calgary, Alberta, Canada. The company invests in natural gas pipelines and gathering and processing facilities in the US and Canada, alongside providing services related to energy infrastructure.
Another dividend aristocrat on our list, the energy company has successfully raised its dividend yield for the past 27 years. Currently, the company offers a quarterly payout of C$0.86, with a yield of 6.44%, as of June 24. Earlier this May, RBC Capital analyst Robert Kwan raised his price target on Enbridge Inc. (NYSE:ENB) to C$65 from C$60 and kept an Outperform rating on the shares of the company.
For the fiscal first quarter of 2022, Enbridge Inc. (NYSE:ENB) recorded earnings per share of $0.6, beating the previous quarter’s EPS of $0.5. The company’s revenue was $11.7 billion, also surpassing the previous quarter’s revenue of $9.8 billion.
Out of 912 hedge funds, 24 hedge funds were long Enbridge Inc. (NYSE:ENB) in the first quarter of 2022, with a total stake value of $2.4 billion. In comparison, 21 hedge funds held stakes in the stock in the previous quarter, with a total stake value of $550 million.
3. Devon Energy Corporation (NYSE:DVN)
Number Of Hedge Fund Holders: 66
Dividend Yield as of June 24: 6.70%
Devon Energy Corporation (NYSE:DVN) is an energy company based in Oklahoma. The core business of the company is the exploration, development, and production of oil and hydrocarbon in the United States. The company’s dividend yield as of June 24 came in at 6.70%. On May 2, Devon Energy Corporation (NYSE:DVN) declared a $1.27 per share quarterly dividend, surpassing the previous. The dividend will be paid to shareholders on June 30.
Devon Energy Corporation (NYSE:DVN) announced its financial results for the first fiscal quarter of 2022 on May 5, posting an EPS of $1.88, crossing market estimates by $0.12. Revenue for the quarter increased 116.35% on a year-over-year basis to $3.81 billion, surpassing predictions by $242.30 million.
Raymond James analyst John Freeman raised the price target on Devon Energy Corporation (NYSE:DVN) to $102 from $90 and maintained a Strong Buy rating on the shares after the company announced the acquisition of RimRock Oil and Gas for a purchase price of $865 million. Based on the analyst’s remarks, the deal is immediately accretive, with a free cash flow yield of 25% at strip pricing.
A top dividend stock among investors, 66 hedge funds were long Devon Energy Corporation (NYSE:DVN) in the first quarter of 2022, up from 51 funds in the preceding quarter. The total stakes held in Q1 amounted to $1.92 billion, compared to $1.74 billion in the last quarter. Rajiv Jain’s GQG Partners is the company’s biggest shareholder, with a position worth roughly $888 million.
Here is what GoodHaven Capital Management has to say about Devon Energy Corporation (NYSE:DVN) in their Q4 2020 investor letter:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
2. Kinder Morgan, Inc. (NYSE:KMI)
Number Of Hedge Fund Holders: 40
Dividend Yield as of June 24: 6.74%
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest energy infrastructure companies in North America that operates through four business segments: Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. The company’s 85,000 miles of pipelines serve major consuming domestic markets and transport approximately 40% of the natural gas consumed in the United States. The company has raised its dividends for 5 years in a row. As of June 24, the stock’s dividend yield stood at 6.74%.
Earlier this April, Wells Fargo analyst Michael Blum upgraded Kinder Morgan, Inc. (NYSE:KMI) to Equal Weight from Underweight with a price target of $21, up from $19, to reflect higher assumed multiples for refined products assets in his sum-of-the-parts valuation. Although the analyst still views Kinder Morgan, Inc. (NYSE:KMI) as a defensive midstream company, he believes the company could benefit from a number of tailwinds on account of surging inflation, oil prices hovering around $100/Bbl, and robust demand for natural gas/LNG. These include higher products pipeline growth, higher CO2 segment earnings, strong demand for natural gas, and potential LNG liquefaction projects.
On April 20, Kinder Morgan, Inc. (NYSE:KMI) announced its financial results for the first fiscal quarter of 2022, posting an EPS of $0.32, beating Street estimates by $0.04. The $4.29 billion revenue surpassed market consensus forecasts by $546.32 million.
At the end of Q1 2022, 40 hedge funds were bullish on Kinder Morgan, Inc. (NYSE:KMI) with stakes worth $1.34 billion. This is compared to 39 positions in the previous quarter with stakes worth $998.85 million. The hedge fund sentiment for the stock is positive.
1. Altria Group, Inc. (NYSE:MO)
Number Of Hedge Fund Holders: 47
Dividend Yield as of June 24: 8.29%
A Virginia-based corporation and a worldwide distributor, Altria Group, Inc. (NYSE:MO) is one of the world’s largest producers and marketers of tobacco, cigarettes, and related products. One of the highest yielding S&P 500 dividend stocks, the tobacco company is a dividend king with a history of 52 years of consecutive dividend growth, making it one of the best stocks for inflation hedge.
Altria Group, Inc. (NYSE:MO) currently offers a quarterly payout of $0.90 per share, with a dividend yield of 8.29%, as of June 24. This June, Goldman Sachs analyst Bonnie Herzog noted that shares of Altria Group, Inc. (NYSE:MO) have traded off sharply following a Wall Street Journal article suggesting that the FDA is preparing a marketing denial order on all JUUL products, which would effectively remove such products from the U.S market. However, the analyst maintained her Buy rating and $59 price target on Altria Group, Inc. (NYSE:MO) shares, citing “strong conviction” that Altria will be able to deliver on its mid-single digit EPS growth target for FY22 and beyond despite this hurdle.
A total of 47 hedge funds out of the 912 tracked by Insider Monkey held stakes in Altria Group, Inc. (NYSE:MO) worth roughly $1.95 billion at the end of the first quarter of 2022. This is compared to 39 hedge funds in the previous quarter with a total stake value of approximately $1.05 billion. Rajiv Jain’s GQG Partners is a leading shareholder in Altria Group, Inc. (NYS:MO), with over 18.3 million shares worth more than $956 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
You can also take a look at Top Stock Picks of Michael Burry and 10 Low Beta Dividend Stocks with High Yields
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- 10 Best Inflation-Proof Stocks
Disclose. None. 10 Best Dividend Stocks For Inflation is originally published on Insider Monkey.
