Dividend stocks are often deemed a reliable inflation hedge because their growth rates outpace inflation rates in the long run. Generally, we can expect 8% to 10% growth rates in stocks compared to inflation’s 2% to 3%.
During times of inflation, like many speculators are expecting imminently in the US, creates a sense of urgency. Portfolios with high bond composition are bad news, as bonds struggle to outpace inflation.
Additionally, safe dividend stocks give you more choice. Times of high inflation generally mean that prices will rise in the future – this incentivizes us to spend now, before prices increase, instead of saving. Not to mention the incredibly low-interest rates that see our current accounts depreciate in real terms.
Instead, the first option with dividend stocks is whether or not to take the dividend money and spend it in the inflationary economy. The second option is to automatically reinvest those dividends back into purchasing equity of the same shares (i.e. like in an accumulation fund).
No one strategy is better than the other as it depends on preference, but the key here is value in having choice during a turbulent, inflationary economy. Many will decide to forgo income in order to benefit from demand-pull inflation on the stock price – thus pointing out non-dividend stocks to be a logical option, too.
It’s important to remember that dividend-paying companies have a reputation to uphold – increasing dividend payments year on year is important. So, not only will your equity outpace inflation, but dividend payouts may too.
It may be that non-dividend stocks outperform dividend stocks in terms of growth, but they can often be more volatile, which is also made worse by a period of inflation (often a crash is preceded by high inflation). The best dividend stocks would be safer than non-dividend growth stocks during such a crash, partly because they tend to be larger, more established companies that are often recipients of bailouts.
So, let’s take a look at which top dividend stocks to keep an eye on. Here are 3 hand-picked dividend stocks from countries around the world. Let’s start by taking 3 stocks from the top 10 dividend stocks in Canada according to milliondollarjourney.com.
Emera is a leader when it comes to diversified energy with operations in Canada, US, and the Caribbean. Emera has a dividend yield of 4.41% and over 4% 5-year revenue growth. Perhaps more impressively, the 5-year EPS growth rate is almost 7%, too. Whilst being in the Utility sector, Emera is impressively diverse, being involved with gas and electricity distribution, along with investments in green energy assets.
Algonquin Power & Utilities
Algonquin Power & Utilities is another diversified utility company and is from North America. The company operates with very similar types of energy as Emera, but is more involved in its own renewable energy operations. They have a large portfolio of wind, solar, and hydroelectric assets. Algonquin Power & Utilities has a P/E of 11.17 and a 4.42% dividend yield. Furthermore, their 5 year EPS growth is 18.88%.
Telus is the second largest telecom company that operates in Canada and has a diverse range of services, from IP and data to entertainment and video. The company has a strong presence in healthcare, business, and personal industries. Telus has a P/E of 29 and a 4.73% dividend yield. It also has a 28B market cap and a 137% payout ratio.
M&G is an investment management company. Headquartered in London, the firm deals with real estate, equities, and portfolio management. Most impressively, it has been running for 80 years through many recessions and has a market cap of over £5 billion. M&G de-merged from its parent company in 2019, so it has only recently entered the FTSE 100. However, it has a low PE ratio of 4.55 and a strong dividend yield of 8.32%.
Persimmon is a British company that builds residential homes. They have 31 regional businesses and build in around 380 locations around the world. This is certainly one of the most successful British home-building firms if that is an industry you’re confident about. Persimmon has a PE ratio of 10.23 and a dividend yield of 7.32%. Their dividends have doubled from 110p to 235p since 2017.
Polymetal International is a precious metals company that is headquartered in Cyprus and deals mostly in producing gold and silver. With 9 mines around the world, they continue to build on their market cap of £7.2 billion. Furthermore, this may be a commodity to keep an eye on with the adverse volatility of both major fiat currencies as well as crypto.
Polymetal International has a dividend yield of 6.13% and a PE ratio of 9.96.
BHP is the world’s biggest mining company that has been benefiting from China’s strong recovery, along with the struggling USD. The group was founded in 1851 with a market cap of 222 billion AUD.
BHP has a PE ratio of 26.8, and a dividend yield of 4.35%. 2016 saw that dividends can drop significantly during a recession, but a 21.6p dividend was still paid.
Brickworks is a concrete block and brick manufacturing company. Whilst Brickworks doesn’t have the highest dividend yield (2.93%), they haven’t cut dividends in over 40 years. With a market cap of 3.11 billion AUD, Brickworks has become a market leader since it was founded in 1934.
Brickworks’ dividend yield is currently 2.94% with a PE ratio of 9.87. The stock has a beta of 0.82, meaning it’s less volatile than its peers and competitors and has almost doubled its price since May 2023.
APA Group is an Australian company that both owns and operates natural gas and electricity assets. This is the largest natural gas infrastructure business in Australia, and we could see their pipelines being used to facilitate a growing green industry too.
APA Group has a market cap of 11.13 billion AUD, with a dividend yield of 4.64% and a PE ratio of 85.
Lindt & Sprungli
Lindt & Sprungli is one of the most prestigious and oldest chocolate-makers in the world. Founded over 175 years ago, the Swiss company has become a global leader in premium chocolate – something that’s generally considered recession-proof, to an extent. Lindt has a market cap of 21 billion CHF, along with a PE ratio of 69 and a dividend yield of 1.21%. They have kept up stable or rising dividend payments for 17 consecutive years.
BAE is Britain’s largest defense contractor and a major supplier of the US army – something that doesn’t appear will be contracting anytime soon. From military aircraft to combat land vehicles. The company was only founded in 1999 but has grown to 19 billion in annual revenues, a 4.1% dividend yield, and 21 consecutive years of stable (or rising) dividend payments.
Again, the best dividend stocks are often some of the biggest companies in the world. Unilever is no exception, with a massive market value of $149 billion USD. selling food, beauty care, personal care, and all of the above, Unilever is a master of diversification and branding. The current dividend yield is 3.4% and a PE ratio of 23.4. Most impressively, they haven’t reduced dividend payments for 21 consecutive years.
Investing in a tobacco company in 2023 may seem like you’re setting yourself up for failure, but many smoking demographics around the world aren’t shrinking. Japan tobacco had seen declining share prices for a number of years, though this trend has reversed recently. Japan tobacco has an incredibly high dividend yield of over 7% and a PE ratio of 11.5.
Samsung is a famous South Korean mobile phone manufacturer, but their securities company that falls under Samsung Group is a financial services company that offers services from stock brokerage to asset management and proprietary trading.
Samsung securities have a 4 Trillion KRW market cap, along with a 5.3 PE ratio and 4.81% dividend yield. Dividends have been growing at a high rate since 2015; from 650 KRW to 2,201 KRW.
SOMPO Holdings is a Japanese insurance company that is listed on the Nikkei 225. The firm is one of the top three insurers in Japan, with a market cap of over 1.6 trillion JPY. The company has only a short history of dividend payments since 2011 but has seen it grow year-on-year to 105 yen.