Login

Inflation Kills — But You Can Beat It

The job market is extremely strong, and over the last 12 months wages in the U.S. have increased by an average of 2.7%.

That’s not bad; after all… everybody loves a raise.

But because inflation, as defined by the consumer price index, was up by 2.9% during the same period, Americans weren’t even keeping up with the rising cost of living.

You’ll never catch me turning down a pay raise, but my favorite kind of raise is the one in my portfolio, not in my paycheck.

Why?

For many investors, their investment portfolio is larger than their paycheck!

While workers aren’t keeping up with inflation, dividend-focused investors — like us — are not only keeping up with inflation… we’re beating the pants off of it.

In 2017 for instance, investors hauled in a record $1.25 trillion in dividends, a 7.7% year-over-year increase! That’s 2.5 times the inflation increase.

So far this year, the companies in the S&P 500 have increased their dividend payout by an average of 8.1% on a year-over-year basis. That’s 179% above the rate of inflation and it’s the main reason I focus on dividend-paying stocks. For example:

S&P 500

  • Diageo PLC (NYSE: DEO). We first introduced DEO to Wealth Watch followers on June 6. Over the past 12 months the stock’s surged. But for income folks the real news is they increased their dividend by over 52%. They also have raised their dividend for six years running
  • Toyota (NYSE: TM) We first mentioned TM to followers on Feb 12 of this year, our interest at the time being its EV initiatives and ever increasing global footprint. But TM also pays a great dividend and it’s now bumped its dividend from $1.79 to $2.18 a share, almost a 22% increase
  • Starbucks (NYSE: SBUX). We first introduced SBUX to followers on April 5. The reason? Since last year SBUX has raised its dividend by 44% per share. Plus, it’s raised its dividend payouts for seven years running.

Those are very nice raises, but an equally important benefit is the lower risk that comes with those dividends. Study after study have consistently proven that dividend-paying stocks significantly outperform nondividend stocks during bear markets.

Example: In 2002, when nondividend stocks declined by 30%, dividend-paying stocks fell only 10%. That’s 66% less downside volatility!

With all the recurring triple-digit drops in the Dow lately and plenty of geopolitical instability, that safety cushion of bear market protection is exactly what a savvy investor needs today!

Here’s to growing your wealth,

Mike Burnick

Mike Burnick
Chief Income Expert, Mike Burnick’s Wealth Watch

You May Also Be Interested In:

The No. 1 Secret to Trading Success

Every trader is different and it’s only natural that different traders have different sets of rules. Today, Greg Guenthner gives us invaluable tips to build the foundation your own trading rules.

Mike Burnick

With over 25-years of professional investment experience, Mike Burnick was a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. Mike joined Weiss Research in 2002 as an analyst and writer, and in 2008 was named Director of Research and Client Communications at Weiss Capital Management, where he assisted...

View More By Mike Burnick