Last week’s Consumer Price Index report by the U.S. Bureau of Labor Statistics indicated that inflation is now 7.5% — a 40-year high. Companies with pricing power can help pass some of those costs along to their customers. And stocks that pay dividends offer a passive income stream that helps to offset inflation too.
Investing in equal parts of Rio Tinto ( NYSE:RIO ), Kinder Morgan ( NYSE:KMI ), and Autoliv ( NYSE:ALV ) gives an investor an average dividend yield of 5.8% and exposure to different sectors of the economy. Here’s what makes each dividend stock a great buy now. Image source: Getty Images. Push your passive income pedal to the metal
Scott Levine (Rio Tinto ): With a market cap of nearly $130 billion, Rio Tinto is one of the largest mining stocks available to investors. Similarly, its eye-popping 8.7% forward dividend yield is a notably high option for investors looking to swim in a strong stream of passive income.
Experienced investors know that chasing a high yield can be a foolhardy endeavor. But in the case of Rio Tinto, even conservative investors can find reason to be assured that the company’s high payout is not placing it in financial jeopardy.
Over the past four years, the company has averaged a payout ratio of 57%. And it doesn’t seem like management’s circumspect approach is waning; over the past 12 months, Rio Tinto’s payout ratio is 40.3%. Skeptics, on the other hand, may place less faith in the payout ratio because mining companies can massage non-cash charges like depreciation (with respect to the value of their mineral assets) and arrive at misleading earnings figures, which in turn would skew the payout ratio. Nonetheless, consider the company’s free cash flow, and the high dividend seems well-covered. Over the past five years, […]
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