Inflation Is Attacking Your Wallet. Defend Your Money with These 3 Dividend Strategies.

By TradeSmith Research Team

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Inflation may have “cooled” by falling from 9.1% in June to 8.5% in July, but I bet it doesn’t feel like anything is cheaper yet.

You might be especially feeling the pinch with the back-to-school season.

If you’re helping your child or grandchildren with furnishing their dorm, furniture and bedding costs are up 14.8% since last July, and clocks, lamps, and decorative items cost 8.7% more.

I’m not holding my breath and waiting to see if things get better on paper. Hope isn’t an investing strategy — but generating income through high-quality stocks is.

Instead of watching your purchasing power erode, you can use dividend investing strategies in the battle against inflation.

Here are three ways to turn your hard-earned money into even more money.

Dividend ETFs

While I believe that you will make the most money through investing in individual stocks, I understand that some investors prefer investing in an exchange-traded fund (ETF).

Buying shares of an ETF can cost less than buying shares of an individual stock, and it can help those who are risk-averse feel more comfortable with investing; an individual stock can have more price swings than an ETF.

Searching through our system, I found that the Vanguard High Dividend Yield ETF (VYM) is in our Green Zone.

VYM tracks companies that are forecast to have above-average dividend yields, which is an appealing proposition for some investors, as it saves them from doing research on what dividend yields could be above average.

Its top five holdings are:

  • JPMorgan Chase & Co. (JPM)
  • Johnson & Johnson (JNJ)
  • The Home Depot Inc. (HD)
  • Procter & Gamble Co. (PG)
  • Bank of America Co. (BAC)
Over the past five years, VYM has had an average yield of 3.05%, and it currently has a yield of 3.01%.

Dividend Reinvestment Plans (DRIPs)

TradeSmith CEO Keith Kaplan recently wrote about DRIPs, and I thought it was a great idea to share this strategy with those who may be unfamiliar.

When companies began offering stock purchase plans to their employees, they also started allowing their employees to use their dividend payments to buy more shares of the company.

Eventually, that same benefit was rolled out to people outside the company — shareholders.

With a DRIP, instead of collecting the dividend as soon as it is paid out, you can reinvest it to own more shares of a company. It doesn’t matter if the dividend payout is less or more than the current stock price, because you will receive fractional shares.

The benefit of this is that you are acquiring more shares of a company without having to add new capital into your brokerage account to buy them.

By acquiring more shares, your dividend payouts will increase, and you can turn off the DRIP at any time to collect the payout as regular income.

Monthly Dividend “Paycheck” Calendar

While most companies pay out dividends each quarter, there are some companies that pay out dividends each month.

You still want to put each company through the ringer before handing over your hard-earned money, and you should never buy a company solely because it pays a monthly dividend.

But if you find a few that you believe are good long-term investments that do offer monthly dividends, owning them is like building your own “paycheck” calendar.

Just like how folks receive a certain amount of money each month when they are working, you can receive new income each month through monthly dividend stocks.

One company that pays a monthly dividend and is in our Green Zone right now is LTC Properties Inc. (LTC).

It operates as a REIT (real estate investment trust), which means it’s required to pay out at least 90% of taxable income to shareholders.

LTC invests in senior housing and health care facilities, with half of its portfolio consisting of skilled nursing properties and the other half consisting of senior housing.

Baby boomers are currently the second-largest population group in the U.S. With 69.6 million Americans between the ages of 58 and 76, there is an ongoing demand for the specialty services offered at the properties LTC invests in.

The company operates in 29 states and has made 202 investments as of June, and it currently offers a dividend yield of 5.07%.

Adding It All Together

What works for person A isn’t always going to work for person B, and that’s part of knowing yourself as an investor.

While person A may love the idea of buying a dividend ETF, person B may prefer to buy a monthly dividend stock.

And that is perfectly fine.

From the simplicity of buying a dividend ETF, to reinvesting dividends, to generating income through monthly dividend stocks, I hope today’s email was helpful in putting different investing ideas and opportunities on your radar.

Remember — you don’t have to sit back and watch your money erode into nothingness.

You can take an active role in your financial future.