The CPI Report Is In: This Is the Type of Stock to Buy Now
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That’s what Senior Analyst Mike Burnick told the readers of Inside TradeSmith on April 6.
Mike has long warned that even though inflation is cooling, it will still remain high.
We saw this in the most recent Consumer Price Index (CPI) report. While most people celebrated the fact that CPI is continuing to fall from record highs, it is still well above the Federal Reserve’s target rate of 2%:
Here’s more from Mike on how to navigate the markets in our current economy.
In today’s uncertain and rapidly changing investment climate, “Cash is king.”
The saying, which tends to bubble back to the surface during bear markets, was popularized in the late 1980s by then-CEO of Volvo Pehr G. Gyllenhammar and was revisited during the Great Recession in 2007 and 2008.
Even the Oracle of Omaha himself, Warren Buffett, uses this advice to plan for and manage risk during financial crises. He likes to keep a cool $20 billion in reserves on Berkshire Hathaway’s balance sheet to cover potential losses — and has been known to save cash in bull markets as “dry powder” for the inevitable bear market to follow.
In the current economic climate, where there is a lot of uncertainty and volatility in the market, we find that — once again — having cash on hand is critical.
In fact, it’s not just critical. It separates the winners from the losers.
And quality stocks that pay you inflation-protected cash dividends are more valuable than ever right now.
Now, I realize some investors think about dividend stocks as B-O-R-I-N-G, but I’m not one of them. I know from many decades of experience in this business that dividends are an absolutely essential element for consistently making money in the stock market.
That’s especially true in times of rising prices when inflation is eroding your purchasing power day after day. Stocks that regularly increase their dividends outperform the market by a wide margin during inflationary periods.
The saying, which tends to bubble back to the surface during bear markets, was popularized in the late 1980s by then-CEO of Volvo Pehr G. Gyllenhammar and was revisited during the Great Recession in 2007 and 2008.
Even the Oracle of Omaha himself, Warren Buffett, uses this advice to plan for and manage risk during financial crises. He likes to keep a cool $20 billion in reserves on Berkshire Hathaway’s balance sheet to cover potential losses — and has been known to save cash in bull markets as “dry powder” for the inevitable bear market to follow.
In the current economic climate, where there is a lot of uncertainty and volatility in the market, we find that — once again — having cash on hand is critical.
In fact, it’s not just critical. It separates the winners from the losers.
And quality stocks that pay you inflation-protected cash dividends are more valuable than ever right now.
Now, I realize some investors think about dividend stocks as B-O-R-I-N-G, but I’m not one of them. I know from many decades of experience in this business that dividends are an absolutely essential element for consistently making money in the stock market.
That’s especially true in times of rising prices when inflation is eroding your purchasing power day after day. Stocks that regularly increase their dividends outperform the market by a wide margin during inflationary periods.
And there are a few ways to find those outperformers.
Winning Dividend Investing
One way to find a winner is by turning to “buy-what-you-know stocks.”These are the investable companies that produce goods and services that you use each day in your own home.
One of Mike’s favorites is J.M. Smucker Co. (SJM).
It produces the Jif peanut butter and Smucker’s strawberry jam for the PB&Js in the lunchboxes of schoolchildren across the country. Its Folgers Coffee has an estimated 35 million drinkers, filling up their coffee cups to start the day or their travel mugs to power through the night shift. And its Milk-Bone biscuits are the treat of choice for many a beloved dog.
Over the last year, the stock price has held up well — showing SJM’s power in an inflationary environment — climbing 11.65% as of this writing compared to a 6.56% loss for the S&P 500.
As of this writing, SJM is in our Green Zone, classifying it as a healthy stock.
It also pays out an annual dividend of $4.08, which is a yield of 2.61%.
Another strategy for finding strong dividend-paying investments is tapping into a dividend stock ETF to pick out individual winners. One option is the Vanguard Dividend Appreciation Index Fund ETF (VIG), which currently has 44.36% of its holdings in a healthy and investable state.
There’s more than a page full of companies in our Green Zone, but here is a small snapshot that also includes the Volatility Quotient (VQ), which shows how much risk is associated with an investment (the lower the VQ%, the better):
Finally, one of the easiest ways to locate dividend-income opportunities is through Mike’s Dividends on Demand service. It’s where he shows investors like you how to generate income on their own schedule and not have to wait for quarterly dividend payouts.
He just showed current members how to earn extra income on a dividend play this week. (You must be logged in to access.)
Bottom line: The headlines may say inflation is cooling, but the Fed is nowhere close to reaching its target rate. You know firsthand how much it costs to buy groceries each week, and you don’t want high inflation to eat away at your savings. By focusing on quality dividend stocks, you can generate money to offset inflated prices.