3 Dividend Stocks Ideal for Dealing with Inflation and Earning Growing Income

Broader markets may have rallied yesterday after FOMC meeting minutes showed policymakers are weighing the possibility of pausing the Fed’s rate hike cycle later in the year. . But while the outlook has calmed the nerves of short-term investors, many macroeconomic headwinds still loom on the horizon, such as elevated and rising risks of recession in the United States.

In these challenging times, building a quality, income-generating portfolio can dramatically improve anyone’s investment performance. This can be done by buying stocks of companies with strong balance sheets, a broad economic base, and a tradition of rewarding investors with growing dividend payments.

These companies typically provide products and services that are so essential to consumers that one cannot imagine everyday life without them. Furthermore, it makes these companies resilient to market crashes, wars, depressions, geopolitical upheavals, and asset bubbles.

With this theme in mind, we’ve selected three stocks below that income investors might consider buying now, particularly when is high. Each of these stocks not only offers the potential for significant capital gains, but has also resulted in significantly increased payouts each year to counter the impact of rising prices.

1. Bank of Nova Scotia

  • Dividend yield: 4.91%
  • Quarterly payment: $0.78
  • Market cap: $76.6 billion

The Bank of Nova Scotia (NYSE:), Canada’s third-largest lender, currently offers one of the highest yields among the country’s top six banks. It could be a great addition to any long-term income portfolio. Shares of BNS closed Wednesday at $65.36.

The Toronto-based financial institution has the most diversified portfolio among Canadian banks, with a significant portion of its revenue coming from overseas operations, primarily in Central America and the Caribbean.

Chief executive Brian Porter has spent most of his eight-year tenure revamping the international unit by selling off small or underperforming operations and stepping up efforts in bigger, more promising markets. .

Yesterday, the bank announced that its Canadian banking profits rose 27% from a year earlier, thanks to strong growth in mortgage and commercial loans, lower provisions for credit losses and substantial income from commissions.

The lender also has an excellent dividend history. The bank’s earnings growth has translated into dividend increases for 43 of the past 45 years, one of the most consistent records of dividend growth among large Canadian corporations. The bank has been paying dividends since 1833.

2. Home Depot

  • Dividend yield: 2.64%.
  • Quarterly payment: $1.9
  • Market cap: $76.6 billion

The Home Depot (NYSE:) is one of those retailers you can count on to pay regular dividends. In recent years, the home improvement giant has invested heavily to prepare for the onslaught of e-commerce and changing consumer behavior. Its stock closed Wednesday at $293.57 per share.

HD W1

Additionally, HD recently upgraded its full-year earnings outlook after a jump in same-store sales in the first quarter showed demand for home improvement supplies persists, even as mortgage rates rise. increase.

On the conference call with analysts, Chief Financial Officer Richard McPhail said the appreciation in home values ​​has helped boost consumer spending despite inflation.

Atlanta-based HD is also a reliable dividend payer. Over the past five years, its quarterly dividend, on average, has increased by 22% per year. With an annual return of around 2.6%, the company pays $1.9 per quarter. And, with a solid 50% payout ratio, there’s still plenty of room for growth.

3.McDonald’s

  • Dividend yield: 2.26%
  • Quarterly payment: $1.38
  • Market cap: $279 billion

Fast food giant McDonald’s (NYSE:) has a history of rewarding investors. Since it began paying dividends in 1976, the company has increased its payout ratio every year. MCD closed yesterday at $244.01.

MCD W1

McDonald’s has many of the qualities investors look for in a high-income stock: the company has a global competitive advantage over its rivals, a strong recurring revenue model, and a great tradition of rewarding its investors.

After struggling during the pandemic, when restaurant closures hurt its business, the company quickly regained its sales momentum. In April, the company reported better-than-expected earnings and revenue, thanks to price increases in the United States and strong growth in international sales.

MCD pays a quarterly dividend of $1.38 per share. This translates to an annual dividend yield of 2.26% at the current share price. With a manageable payout ratio of around 70%, the company is in a strong position to continue delivering dividend growth.

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