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3 Safe Dividend Stocks to Beat Inflation

3 Safe Dividend Stocks to Beat Inflation

Income investors have become more open to dividend stocks in recent years. With bank interest rates very low and inflation low, dividend stocks have attracted interest despite a modest 1.5% average dividend yield for the sector. S&P500 over the last five years.

However, in recent years, higher inflation and an increase interest rate have kept income investors away from many dividend stocks. Nonetheless, some stocks offer yields that could remain attractive in today’s more inflationary environment, and these could provide a steady stream of income and likely stock market gains in the long term.


Tobacco giant Altria (NYSE:MO) may seem like one of the most counterintuitive places to look for dividend income. The medical industry and government have for decades highlighted the health risks and addictive nature of its main product.

As a result, tobacco consumption declined over time and the industry had to pay hundreds of billions of dollars in settlements. The latest was a $462 million settlement for the Juul e-cigarette in spring 2023.

Despite these challenges, product diversification and price increases have helped Altria maintain a growing level of distribution. In fact, it has become one of the best dividend stocks in the S&P 500.

It has increased its dividend every year since 2010, and “cuts” in the late 2000s involved divestitures. So the increases go back further if we consider these. The current annual payout of $3.92 per share brings the dividend yield to 9.6%.

The dividend appears stable. Through the first nine months of 2023, Altria reported free cash flow of just under $6 billion and dividend expenses of just over $5 billion. That means it can afford the dividend and the $732 million spent on share buybacks.

Still, that leaves little room for other investments, and the stock is down about 13% in 2023 and about 15% over the past five years. Still, if you’re looking for income, the stock looks increasingly capable of continuing to provide a growing income stream.

Real estate income

You can’t discuss S&P 500 dividend stocks without including “The Monthly Dividend Company”, Real estate income (NYSE:O). This real estate investment trust (REIT) owns more than 13,250 stand-alone properties in five countries. Tenants sign long-term “clean leases” in which the tenant covers maintenance, insurance and property taxes.

Contrary to popular belief, consumers still visit stores, restaurants and other establishments in person, despite the growing popularity of e-commerce. In fact, Realty Income’s number of properties continues to grow. In the third quarter of 2023, the company acquired 289 properties. Among its many tenants are some of the country’s best-known companies, including Dollar tree, FedExAnd AMC Theaters.

Additionally, its monthly dividend increased periodically throughout 2023. This brought the annual payout to nearly $3.08 per share, a yield of 5.4%. Additionally, the company generated $2.1 billion in revenue from operations (FFO) during the first three quarters of the year, leaving Realty Income with enough to fund its $1.6 billion in dividend costs during the period.

Certainly, the stock fell as a rising rate environment put pressure on real estate values. But with the Federal Reserve’s announcement of its intention to reduce the federal funds rate, optimism has returned to the stock. Investors are therefore likely to benefit from Realty Income’s stock price growth and increasing stream of monthly dividend payments.

Innovative industrial properties

Innovative industrial properties (NYSE:IIPR), known informally as IIP, is a REIT that provides facilities to medicinal cannabis producers. The industry it serves faces considerable restrictions amid the continued federal prohibition of marijuana. Bank loans are difficult to obtain, and a business’s ability to operate varies by state.

To solve this problem, IIP uses a leaseback program that provides financing by purchasing a business’ property and leasing it back to the previous owner.

As the sector came under pressure over the past two years, IIP’s stock collapsed as the number of unpaid tenants rose. However, almost all REITs periodically deal with non-paying tenants, and IIP has proven adept at renegotiating terms or selling properties when a payment agreement is not feasible.

The stock showed its security by declaring the first dividend increase in five quarters. At $7.28 per share per year, the stock now yields 7.2%. Additionally, through the first nine months of 2023, IIP generated $173 million in FFO revenue. The company paid $153 million in common and preferred dividends, indicating it can afford to pay that amount.

Additionally, the stock is up more than 60% from its May lows as the cannabis industry begins to recover. This indicates that investors will not only get a considerable dividend yield, but they could also benefit from a rise in the stock price.

Should you invest $1,000 in Altria Group right now?

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Will Healy holds positions in Innovative Industrial Properties. The Motley Fool holds positions and recommends FedEx, Innovative Industrial Properties, and Realty Income. The Mad Motley has a disclosure policy.

3 Safe Dividend Stocks to Beat Inflation was originally published by The Motley Fool

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