Blunt the Sting of Inflation With These 5 Ultra-High-Yield Dividend Stocks
Like a hot knife through butter, inflation and its effects are cutting down the valuations of most companies on the stock market.
The primary drivers of inflation, excess money printing, the pandemic and the Russian invasion of Ukraine are ongoing. While the market cap of the majority of stocks has steadily declined this year, the yields of most dividend stocks have risen. For investors looking to curb the effects of inflation on their portfolio, here are five ultra-high-yield dividend stocks to consider owning in 2022.
Unable to address either of these issues, the Federal Reserve is doing one of the few things it can: raise interest rates. It did so again this week when it announced another 75 bps rate hike. Such a steep rise in rates hasn’t been seen in decades, leading many to fear it could lead to a recession. This eventuality is looking increasingly likely. History has shown us that one of the best ways of getting through market downturns is by investing in Dividend Stocks.
Below are five high-yielding dividend payers that should provide superior performance in the uncertain times ahead.
1. Williams Companies (WMB) | Yield: 5.96%
The war in Ukraine is showing the world the importance of having domestic energy production. Fortunately, the U.S. has one of the world’s strongest energy production industries. Perhaps the most critical sector of the U.S. energy industry is natural gas.
Considered one of the cleanest fossil fuels to use for energy production, natural gas accounts for 32% of U.S. energy production, more than any other source. Natural gas moves across the country via a network of pipelines. Williams Companies (NYSE: WMB) owns over 30,000 miles of those pipelines and is responsible for transporting 30% of the country’s natural gas.
While most stocks have had a 2022 to forget, Williams Companies is up nearly 18% yearly. An appreciating share price with a dividend yield of 5.96% is tough to find in any environment, much less amid high inflation and rising rates, making the company an attractive option for weathering a recession.
2. Douglas Emmett (DEI) | Yield: 6.21%
The pandemic was rough on just about every industry, but one of the hardest hit was the commercial real estate industry. The pandemic led to many people working from home, significantly reducing demand for office space and apartments near those spaces. As people fled the cities for less populated (and less expensive) locales, the real estate owners took a huge hit. That’s precisely what happened to Douglas Emmett (NYSE: DEI), which owns office space apartments in Los Angeles and Honolulu.
With the pandemic winding down and more companies returning to in-office operations, the commercial real estate industry is getting a much-needed reprieve. The work-from-home phenomenon cut the share price of DEI in half since the pandemic began, but things appear to be turning around. Apartment rent pricing is rising, reflected in the company’s 9.8% revenue growth YOY. The 6.21% dividend yield should serve investors well moving forward, especially if reinvested at these depressed share prices.
3. LyondellBasell Industries N.V. (LYB) | Yield: 6.5%
Keeping with the theme of sticking to the basics and necessities led us to global chemical producer LyondellBasell Industries N.V. (NYSE: LYB). The Netherlands-based conglomerate operates across six product verticals: olefins, polyolefins, polyethylene, polypropylene, propylene oxide and crude oil refinement. The majority of the company’s products are sold to industrial manufacturers.
Interestingly, the company grew revenues at the highest rate (28.3% YoY) on our list, but the stock is still down significantly during the year. This has resulted in it having the lowest P/E on our list at only 4.6. The 6.5% dividend yield would be a rather large cherry on top of what should be significant capital growth when the market returns to normal.
4. Cogent Communications (CCOI) | Yield: 6.77%
Cogent Communications (NASDAQ: CCOI) is a multinational internet provider that built a business out of buying up underpriced assets. The company made headlines recently when it was announced that it would acquire T-Mobile’s wireline division for $1; the companies also inked a separate deal where T-Mobile will pay $700 million over 54 months for IP transit services. T-Mobile is unloading a legacy operation and paying Cogent less than they would likely spend to maintain the network over that period, so it’s a win-win for both companies.
The 6.77% dividend yield and a 40-month-long record of dividend increases are why Cogent finds itself on this list, but the rest of the company is doing quite well. Cogent reported a 4.3% YOY increase in total connections in its most recent earnings report; the company also said that they were able to repay 350 million Euro Notes at a lower exchange rate than it had taken them on at, saving millions of dollars in the process. The stock is down more than the broader market in 2022, so there could be outsized gains when the market turns.
5. Hanesbrands (HBI) | Yield: 8.14%
Being in the Consumer Staple business is an excellent place when consumers might have to choose between necessities and luxuries in a recessionary environment. When it comes to the bad times, sometimes it pays to stick to the basics. And it doesn’t get much more essential than Hanesbrands (NYSE: HBI), a clothing company most known for making underwear.
Hanesbrands has been heavily focused on growing its sportswear brand, Champion, which has seen sales increase by 96% over the last two years. The company has a plan laid out to grow revenues at a compounded 6% rate through 2024. After getting cut in half since the start of the year, shares traded at a P/E of only 6.7. This valuation and the planned growth would make the company appear to be one of the more undervalued on the market. Coupled with an 8.14% dividend yield, the low price makes this stock ripe for dividend reinvestment.
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