There are hundreds of dividend-paying stocks that pay 3% or more, but not all are well-positioned to thrive as inflation hits its highest level in four decades. On the other hand, some excellent high yielders are in excellent shape to weather the storm, and some may even be the long-term beneficiaries of rising prices.
I won’t hold you back. Here are five dividend-paying stocks that are paying excellent returns and are well-positioned to thrive in an inflationary environment.
1. Bank of America: A mega-bank with a lot to gain from rising rates
Bank of America (BAC -0.83%) is trading around 40% below its recent high and just over its book value. And to be fair, banks tend to see loan volumes decline and defaults increase during times of economic crisis.
However, the bad news seems to be mostly priced in at this point, and Bank of America could actually be a net beneficiary of the rise in interest rates that comes with inflation. With a higher proportion of non-interest bearing deposits than most competitors, Bank of America estimates that a 100 basis point shift in the yield curve could generate an additional $5.4 billion in net income interest per year.
2. EPR properties: pent-up demand outweighs inflationary pressures
With stocks just 17% off the top, REP properties (REP -0.34%) is in fact overachieving the S&P500. This 7% yielding stock is a real estate investment trust, or REIT, that specializes in experiential properties. Movie theaters, dining and gaming attractions, water parks, ski resorts and gaming properties are just a few examples of what you will find in EPR’s portfolio.
And despite inflationary pressures and fears of recession, Americans continue to go out and spend money on experiments. Popular attractions are as busy as they were before the pandemic, and box office revenues have been impressive, to say the least.
3. Ally Financial: a different type of bank
Allied Financial (ALLY -1.19%) was previously the financial arm of General Motors, so it should come as no surprise that this 3.5% producer’s main business is auto lending. It created $11.6 billion in auto loans in the first quarter alone.
But there is so much more to the business. Ally has a massive depository platform that provides it with low-cost financing for its car loans, as well as mortgages, personal loans, credit cards, and more. It also has an investment platform with a broker and a robot advisor. And without an expensive branch network, Ally is a highly profitable financial institution with great potential for growth.
4. US Bancorp: A top bank at its lowest level in 52 weeks
With a yield of 4% based on its current share price, American bank (USB 0.09%) is one of the highest-paying big bank stocks. Even though US Bancorp is trading just above its 52-week low, the bank is trading for one of the highest price-to-book valuations in the financial industry, but there’s a good reason for that.
The bank has an excellent track record of responsible lending and high asset quality – in fact, the company remained profitable throughout the 2008-09 recession – and it is one of the few major US banks to be able to say.
5. Simon Property Group: Best Discounted Retail
Last but not least is Simon Real Estate Group (GPS -1.18%), the leading shopping center real estate owner who earns 7.1% at current prices. Granted, Simon’s business could suffer a bit if the US falls into a recession, but for now, it looks much stronger than its stock performance suggests.
Occupancy rose 250 basis points year-over-year in the first quarter, and the company actually raised its full-year guidance. In the long term, inflation could result in an increase in tenant sales volume, which gives Simon the power to set prices to increase his flow of rental income.
Buy with the long term in mind
To be perfectly clear, I have no idea what these five stocks will do over the next few weeks or months. But these are five rock-solid companies that should be relatively immune to the effects of inflation, especially from a long-term perspective.