Bank of America: 12 stocks with inflation-protected dividend yields that can provide stability in an uncertain market
- Core inflation and high GDP means the Fed may have more work ahead to tame inflation.
- But investors looking to profit no matter how high inflation may rise still have options.
- Bank of America found 12 dividend-paying stocks whose yields are protected from inflation.
This week, investors are holding their breath as Jerome Powell considers his next move in the ongoing battle against inflation.
The Federal Reserve paused rate hikes in September, and the smart money believes interest rates will remain unchanged following Wednesday’s FOMC meeting. However, after a surprisingly hot GDP report and a month-over-month increase in core PCE, Powell could surprise everyone and decide that the data is too strong to stop hiking now.
Despite the numerous distractions that keep investors worried these days, such as another looming government shutdown and the threat of a larger conflict in the Middle East, make no mistake: inflation remains the primary driver of where markets will go next.
Bank of America, on the other hand, can assist investors who would rather ignore all of the noise surrounding inflation and focus solely on finding profitable investments.
Bank of America strategists led by head of US equity and quantitative strategy Savita Subramanian compiled a list of dividend-paying stocks whose yields are protected from inflation — no matter how high it rises — in a recent note to clients.
First, they ensured that the stocks were worthwhile by looking for dividend yields greater than the 10-year Treasury yield. They then looked for stocks that had increased their dividends in three of the previous four years, with no negative years during that time period. To weed out inefficient companies, they only considered stocks with an employee-to-sales ratio lower than the median S&P 500 stock. Finally, they sought stocks that had a positive relative beta to inflation.
The 12 companies listed below are the results. Each stock’s ticker, sector, dividend yield, dividend growth over the last four years, employees-to-sales ratio, relative beta compared to Bank of America’s inflation composite, analyst rating, and last closing price are listed alongside it.
1. Boston Properties
Ticker: BXP
Sector: Real Estate
Div Yield: 7.5%
Div Growth: 0.2
Div Growth – 1: 0.4
Div Growth – 2: 1.3
Div Growth – 3: 2.8
Employees / Sales: 0.25
Inflation Composite – Relative beta (vs. SPX): 1.53
BofA Rating: BUY
Last Closing Price: $53.32
2. Federal Realty Investment Trust
Ticker: FRT
Sector: Real Estate
Div Yield: 5.1%
Div Growth: 3.8
Div Growth – 1: 3.8
Div Growth – 2: 2.8
Div Growth – 3: 4.5
Employees / Sales: 0.29
Inflation Composite – Relative beta (vs. SPX): 1.36
BofA Rating: BUY
Last Closing Price: $87.
3. UDR, Inc.
Ticker: UDR
Sector: Real Estate
Div Yield: 4.9%
Div Growth: 10.0
Div Growth – 1: 9.1
Div Growth – 2: 4.6
Div Growth – 3: 12.4
Employees / Sales: 0.81
Inflation Composite – Relative beta (vs. SPX): 0.14
BofA Rating: BUY
Last Closing Price: $31.62
4. VICI Properties
Ticker: VICI
Sector: Real Estate
Div Yield: 6.0%
Div Growth: 29.9
Div Growth – 1: 60.7
Div Growth – 2: 23.8
Div Growth – 3: 21.5
Employees / Sales: 0.01
Inflation Composite – Relative beta (vs. SPX): 1.00
BofA Rating: BUY
Last Closing Price: $27.19
5. Williams Companies
Ticker: WMB
Sector: Energy
Div Yield: 5.2%
Div Growth: 4.7
Div Growth – 1: 3.3
Div Growth – 2: 3.9
Div Growth – 3: 8.5
Employees / Sales: 0.44
Inflation Composite – Relative beta (vs. SPX): 1.35
BofA Rating: BUY
Last Closing Price: $34.24
6. Citizens Financial Group
Ticker: CFG
Sector: Financials
Div Yield: 7.2%
Div Growth: 10.1
Div Growth – 1: 9.9
Div Growth – 2: 1.5
Div Growth – 3: 13.0
Employees / Sales: 1.61
Inflation Composite – Relative beta (vs. SPX): 1.91
BofA Rating: NEUTRAL
Last Closing Price: $23.39
7. Devon Energy Corporation
Ticker: DVN
Sector: Energy
Div Yield: 7.2%
Div Growth: 23.0
Div Growth – 1: 286.6
Div Growth – 2: 322.7
Div Growth – 3: 1.2
Employees / Sales: 0.11
Inflation Composite – Relative beta (vs. SPX): 4.22
BofA Rating: NEUTRAL
Last Closing Price: $46.18
8. Kinder Morga
Ticker: KMI
Sector: Energy
Div Yield: 6.7%
Div Growth: 1.2
Div Growth – 1: 2.6
Div Growth – 2: 4.0
Div Growth – 3: 13.9
Employees / Sales: 0.66
Inflation Composite – Relative beta (vs. SPX): 1.13
BofA Rating: NEUTRAL
Last Closing Price: $16.13
9. Altria Group
Ticker: MO
Sector: Staples
Div Yield: 9.2%
Div Growth: 2.5
Div Growth – 1: 2.7
Div Growth – 2: 2.0
Div Growth – 3: 4.3
Employees / Sales: 0.30
Inflation Composite – Relative beta (vs. SPX): 0.45
BofA Rating: NEUTRAL
Last Closing Price: $40.25
10. Realty Income Corporation
Ticker: O
Sector: Real Estate
Div Yield: 6.2%
Div Growth: 24.1
Div Growth – 1: 57.1
Div Growth – 2: 10.8
Div Growth – 3: 13.7
Employees / Sales: 0.11
Inflation Composite – Relative beta (vs. SPX): 0.18
BofA Rating: NEUTRAL
Last Closing Price: $46.21
11. ONEOK, Inc.
Ticker: OKE
Sector: Energy
Div Yield: 5.8%
Div Growth: 1.3
Div Growth – 1: 0.3
Div Growth – 2: 7.5
Div Growth – 3: 10.3
Employees / Sales: 0.15
Inflation Composite – Relative beta (vs. SPX): 2.93
BofA Rating: NEUTRAL
Last Closing Price: $65.50
12. Truist Financial Corporation
Ticker: TFC
Sector: Financials
Div Yield: 7.4%
Div Growth: 6.4
Div Growth – 1: 6.1
Div Growth – 2: 1.2
Div Growth – 3: 90.2
Employees / Sales: 1.71
Inflation Composite – Relative beta (vs. SPX): 0.74
BofA Rating: NEUTRAL
Last Closing Price: $28.19
