Many of us are going about our lives with little regard for inflation. It can wreak havoc on us financially, though. Steep inflation can make a car that costs $25,000 this year cost, say, $27,000 next year, and $29,000 or more the year after that. Inflation has averaged around 3% annually over many years, and over 25 years, that’s enough to cut the purchasing power of your retirement dollars in half. Inflation isn’t a theoretical risk, either — inflation in America, by one measure, recently hit 7%, the highest rate in 39 years.
Keep inflation in mind as you invest. Certain kinds of stocks can help you fight it effectively. Here are three examples.
1. Waste Management
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For starters, dividend-paying stocks can be great inflation fighters because their payouts generally increase over time, often exceeding the inflation rate. Consider Waste Management (NYSE: WM), the trash collection and recycling giant. Its dividend recently yielded 1.74%, and that payout has increased at an average annual rate of 7% over the past five years and 5.4% over the past decade. That’s certainly enough to keep up with or exceed typical inflation rates. (Another benefit for shareholders is that the company has been buying back shares, boosting the value of the remaining ones.)
If you aim to beat inflation over a long period, Waste Management is a good candidate for your portfolio for reasons beyond its dividend. It’s simply a very solid, recession-proof business since people (and companies) will need their garbage collected no matter what the economy is doing. Its stock reflects its strength, as it has averaged annual growth of 17% over the past decade — without even counting dividends.
The company is North America’s premier trash collection and recycling business, involved in everything from collection, transfer, and disposal services to recycling and resource recovery. It also owns and operates multiple landfill gas-to-energy facilities, profiting from environmentally friendly practices.
Apple (NASDAQ: AAPL), maker of devices that may be in your pocket, on your wrist, or on your desk right now, is another dividend payer. Its payout may seem meager, though, recently at 0.54%. It’s been growing at a respectable clip, though, averaging annual growth of 9.1% over the past five years. It, too, has been executing stock buybacks.
Apple offers some protection against inflation not only through its dividend but also through its business. When inflation results in steeper prices for the components of its various devices, it can simply hike …….