Consumers and investors may be alarmed by rising prices. But a combination of prudent spending and investing can help these overlapping groups of people get through a period of uncertainty brought about by pent-up demand and supply shortages.
Below are two lists of 19 dividend stocks with attractive yields — companies that are expected to have plenty of cash flow to cover dividend increases or other actions that may be good for shareholders, including stock repurchases and business expansion.
The consumer price index rose by 0.9% in only one month — June — the largest increase since 2008. Jeffry Bartash points out that about a third of the overall price increases came from used-vehicle prices. For the 12 months through June, used car and truck prices were up 45%, according to the Bureau of Labor Statistics. It’s easy to say that you shouldn’t buy a car or truck this year. The incredible demand for used vehicles has led to a shortage for many of the most popular new ones, which means dealers will be less likely to haggle.
Of course you might be in a pickle and need to get another car or truck at the worst time, but maybe you can make a modest selection this time. You might also delay a plan to sell your home and move into a bigger one, considering that every other national housing boom you have ever witnessed has eventually cooled. In other words, it is possible some of your big spending plans can be curbed or delayed.
Two dividend stock screens
What do you want from a dividend stock? The most obvious answer is “income,” but what may be more important is that the dividend increases over time. That’s how you stay ahead of inflation. Even when official inflation figures are low, your personal inflation can be considerable, depending on your circumstances. Or you may need investment income to replace part of your working income when you retire.
Here’s a recent list of the 30 stocks in the S&P 500 index whose dividends increased the most over the past five years. Their dividend yields may not have been very high to begin with, but if you had held them for five years, the yields on your five-year-old shares would have grown significantly.
For this new screen, we took a different approach to focus more on higher current dividend yields. Beginning with the S&P Composite 1500 Index (made up of the S&P 500
SPX,
the S&P Mid Cap 400 Index
MID,
and the S&P Small Cap 600 Index
SML,
), we started with stocks with dividend yields of at least 4.26% — three times the 1.42% yield on 10-year U.S. Treasury notes on July 13.
Then we looked at free cash flow yields. A company’s free cash flow is its remaining cash flow after planned capital expenditures. It can be used to increase dividends, buy back stock, pay down debt, business expansion…