Durable Dividends

Protect Your Portfolio From Inflation With Dividend Growth Stocks

Nick Ward

56 postsJune 16, 2022

The S&P 500 just experienced one of the worst 5-day sell-offs in its history. The major index is down roughly 9% during the last week and while investors received a bit of relief from the selling yesterday when the market rallied on the Fed’s decision to raise rates by 75 basis points (in an attempt to get ahead of the curve and fight rising inflation), the fact of the matter is, I know that there are many very anxiously individuals out there wondering what they should be doing with their money during these tumultuous times.

The biggest issue with today’s market is that there doesn’t appear to be any safe havens for investors to hide out in while this inflationary storm passes…

Equities are selling off, bonds are selling off, crypto currencies are getting crushed (apparently Bitcoin isn’t the new-age inflation hedger that many thought it might be), silver is down during 2022 and gold is essentially flat on a year-to-date basis.

And, since last Friday’s inflation report, all of these major asset classes are negative.

In short, nothing seems to be working these days and this puts investors in a rather hopeless position.

The Consumer Price Index saw gains of 8.6% during the month of May, marking the highest inflation figures that we’ve seen since 1981. This means that stashing cash underneath one’s mattress and riding out the storm isn’t a good option either, because that cash is losing value at an incredibly rapid rate.

On the bright side, core inflation (inflation ex-energy and food) was a bit lower, at 6.0%; however, putting cash in a -6% mattress account still doesn’t seem very appealing to me.

Thankfully, as always, I have a suggestion for another path to take…

A path that I talk about every week here at Durable Dividends…

My favorite path, when it comes to reaching financial freedom, simply and easily…

Of course, I’m talking about dividend growth investing.

One of my favorite aspects of this strategy is the reliable annual dividend increases (and the compounding associated with re-investing these growing dividends) that dividend growth stocks provide.

I often talk about the importance of this organic dividend growth as a way to ward off inflation in retirement (because even during normal economic times, low single digit inflation is the Fed’s target).

But, these days, it’s not just retirees who are worried about maintaining purchasing power. This is an issue that everyone is experiencing with the cost of goods and services skyrocketing.

So, when thinking about putting this piece together, I wanted to show that there are many dividend growth stocks that are (and have been) protecting their investors’ passive income streams from being eroded away by the inflation that we’re seeing in the market.

For the sake of this piece, I will use the 8.6% CPI result (not the 6.0 core inflation data) to prove the benefits and effectiveness of a dividend growth strategy (which works across a myriad of economic environments).

I looked up and down my personal holdings and my watch list (blue chip stocks that I don’t own, but am strongly considering buying) and did my best to put together a well diversified list of dividend growth stocks that have exceeded last Friday’s 8.6% CPI growth figure with their most recent dividend increase…and with their trailing 5-year dividend growth rates.

In other words, not only have these companies been protecting purchasing power with their most recent raises, but they’re also been doing it consistently over the longer-term.

This dividend growth data provides me with immense peace of mind during today’s inflationary period and I hope that it might put your mind at ease as well….

In the consumer discretionary space, we have companies like Lowe’s (LOW), Home Depot (HD), and Nike (NKE)…

Lowe’s recently raised their dividend by 31.3%. The stock’s 5-year DGR is 17.30%. And, after their recent sell-off, LOW shares yield 2.35%.

Lowe’s peer, Home Depot, is also a great dividend growth company. HD raised its dividend by 15.2% earlier in 2022. HD’s 5-year DGR is 19.0%. And, HD shares currently yield 2.72%.

Nike provided investors with a 10.9% raise when it announced its most recent dividend increase. NKE’s 5-year DGR is 12.0%. NKE shares currently yield 1.08%.

From the technology sector, Microsoft (MSFT) and Oracle (ORCL) stood out…

Microsoft’s most recent dividend raise came in at 10.7%. MSFT’s 5-year DGR is 9.4%. MSFT shares currently yield 0.99%.

Oracle just provided investors with an 18.5% dividend increase last week. The stock’s 5-year DGR is 14.9%. After their double digit raise, ORCL shares yield 1.84%.

There are many stocks in the healthcare space that pay reliably growing dividends, but many of the blue chips are mature and therefore, their growth rates are below the target 8.6% threshold that I’m basing this piece off of. However, companies like Amgen (AMGN) and Zoetis (ZTS) exceeded that level with their recent and trailing 5-year dividend growth results…

AMGN’s most recent dividend increase came in at 10.2%. AMGN’s 5-year DGR is 12.0%. And, after its recent dip, AMGN currently yields 3.29%.

ZTS’s most recent dividend raise was 30%. The stock’s 5-year DGR is 21.40. ZTS yields 0.82%.

A couple of major players in the U.S. railroad space also met the dividend growth qualifications that I was looking for, offering investors interested in industrial and/or logistics exposure a chance to join in on the fun…

Union Pacific (UNP) raised its dividend by 10.2% last month. The company’s 5-year DGR is now 13.70%. UNP currently yields 2.48%.

Norfolk Southern (NSC) also recently provided a double digit raise, increasing its dividend by 13.8% earlier in 2022. NSC’s 5-year DGR now stands at 12.0%. NSC shares currently yield 2.21%.

In the financial/fin-tech space, several credit card players as well as an asset manager all exceeded my targets…

MasterCard’s (MA) most recent dividend increase was 11.4%. The stock’s 5-year DGR is 18.30. And, MA currently yields 0.60%.

MA’s rival, Visa (V) is also a well known dividend growth stocks. V’s most recent dividend raise came in at 17.2%. V’s 5-year DGR is 17.90%. V currently yields 0.76%.

And, for investors looking for a bit more yield, we have BlackRock (BLK). BLK’s most recent dividend increase was 18.2%. BLK’s 5-year DGR is 12.50%. And, after its recent sell-off, BLK yields 3.25%.

When thinking about food and beverage players, I ran into the same issue that I had with healthcare (many of the highest quality companies are mature and have mid-single digit dividend growth rates). However, Costco (COST), Dominos (DPZ), and Starbucks (SBUX) all exceeded our inflationary target…

Earlier in the year, COST raised its dividend by 13.9%. The stock’s 5-year DGR is 11.90%. COST currently yields 0.78%.

Dominos raised its dividend by 17% back in March of 2022. The stock’s 5-year DGR now stands at 19.90%. DPZ yields 1.14%.

Starbucks provided investors with an 8.9% dividend increase when it last raised its quarterly payment. SBUX’s 5-year DGR is 16.70%. SBUX shares currently yield 2.64%.

And last, but certainly not least, in the software space, both Accenture (ACN) and Automatic Data Processing (ADP) have provided wonderful dividend growth results for investors…

ACN’s most recent dividend raise was 10.2%. The company’s 5-year DGR is 9.30%. And, ACN shares currently yield 1.38%.

ADP’s most recent dividend increase came in at 12%. ADP’s 5-year DGR is 11.90%. And, ADP’s dividend yield is currently 2.01%.

As you can see, there are plenty of choices out there in the DGI space that have (and continue to) provide very high levels of dividend growth.

Obviously the past doesn’t necessarily predict the future and it’s certainly possible that dividend growth from these companies slows down moving forward (especially if we enter into a recession). But, looking at long-term data here, these blue chips have been able to provide very reliable fundamental and dividend growth throughout a wide variety of economic conditions and I trust their management teams’ abilities to continue their winning trends.

All equities carry risk (that’s unavoidable) and no dividend is ever 100% safe; but, I feel comfortable owning blue chip stocks because no other major asset class (that I’m aware of) provides the same reliable growth potential over the long-term.

And frankly, I’m sure that these aren’t the only dividend growth stocks that meet the qualifications set out in this piece (these are just the blue chips that I track on a daily basis).

I can’t cover every single stock on my watch list; there are hundreds of dividend growers of The Dividend Champions List and I’m sure that investors could find other stocks that fit their needs using that free resource. But, this article just goes to show that the dividend growth strategy can easily protect the purchasing power of an investors’ passive income stream from being eroded away by inflation, even in today’s near-record inflationary environment.

This is what allows me to sleep well at night, even with surprisingly high CPI prints.

If you enjoyed this article, make sure to subscribe to my YouTube channel because in the next day or so I plan to put together a video highlighting the valuations attached to each of these strong dividend growth plays (because remember, quality is just one part of a complete investment thesis…valuation is the other half).

Best wishes all!

This article is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended. It does not guarantee that securities mentioned in this newsletter will produce profits or that they will equal past performance. Additionally, we are not an investment advisor and do not offer securities or tax advice. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. Nicholas Ward, contributors and staff members of Wide Moat Research may hold positions in some or all of the stocks listed.

Disclosure: Of the stocks listed in this article, Nicholas Ward is long LOW, HD, NKE, MSFT, AMGN, MA, V, BLK, DPZ, and SBUX.

Nick Ward

56 posts

View all my Posts

Nicholas Ward is a research analyst who currently writes for Seeking Alpha, The Dividend Kings, iREIT, and Forbes Real Estate Investor. Before that, he was Founder and Editor-in-Chief of The Dividend Growth Club, as well as the Income Minded Millennial. Nicholas has also contributed to Sure Dividend, Investing Daily, and The Street, where he covered stocks in Jim Cramer's Action Alerts PLUS Portfolio.

Nicholas holds a bachelor of arts from The University of Virginia, where he studied English and studio art. Prior to transitioning into the financial industry, he managed a vineyard in the foothills of the Blue Ridge Mountains.

The Stock Market Holds Steady

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Protect Your Portfolio From Inflation With Dividend Growth Stocks

Nick Ward

56 postsJune 16, 2022

Featured Articles

The Great Housing Market Migration Is VERY Interesting

Let Dividends Help You Deal With Disappointment In The Stock Market

Amazon Wants to Ask What Ails You

Wall Street’s Workforce Crisis Should Be Taken Seriously

Santa Claus Has Left the Building

Protect Your Portfolio From Inflation With Dividend Growth Stocks

56 postsJune 16, 2022

REIT Mutual Funds

REIT ETFs

Not All Dividends Are the Same