4 High Yielding Stocks That Can Help You Crush Inflation
Inflationary pressures have been at the forefront of investors’ concerns for nearly a year now. In December, the consumer price index, a measure of inflation, stood at 7%, the highest level since 1982.
Inflation can be tricky for investors and regulators, but they don’t have to be. According to a study by Fidelity, dividend payouts have accounted for 40% of overall stock market return since 1930. Research shows that during the inflationary periods of the 1940s and 1970s, dividends accounted for 65% and 71% of S&P500is back.
Prudential Financial (NYSE: PRU), United Bankshares (NASDAQ:UBSI), Virtual Financial (NASDAQ:VIRT)and Morgan Stanley (NYSE:MS) are four high-yielding stocks that offer dividends above the S&P 500 average and can also help you crush inflation.
1. Prudential Financial: 4.17% dividend yield
Prudential Financial is a provider of life insurance and other financial products. The company fell on hard times in 2020 when the coronavirus pandemic first emerged, but it recovered well in 2021 and saw its stock beat the S&P 500 total return for the year.
Last year, management focused on cutting costs and eliminating low growth products to focus on those with higher growth potential. The company cut costs by $590 million last year alone, aiming to save $750 million by 2023. It also boasts a strong balance sheet, with $400 billion in bonds and cash , while sporting a debt ratio. ratio of 0.6.
Life insurance companies should continue to bounce back as the world returns to some level of normalcy. This company should also benefit from rising interest rates, as its investment portfolio generates higher returns. As a result, he should be able to deploy some of that capital into higher-yielding investments, as the Federal Reserve is expected to raise rates four times or more in 2022.
2. United Bankshares: 4.09% dividend yield
United Bankshares is a regional bank operating in the Mid-Atlantic and Southeast regions of the United States. The bank has a strong presence in the Virginia-Washington, DC metropolitan area. One thing it has done particularly well is acquiring smaller banks and integrating them into its business. Since 1982, the bank has made 33 acquisitions. In recent years, it has added banks in North Carolina and South Carolina, and it has expanded from its headquarters in West Virginia to the Washington, DC market.
United Bankshares is a solid banking stock that has demonstrated its ability to perform regardless of the market environment. The bank has maintained an average efficiency ratio – a measure of how efficiently the bank underwrites loans – of 53% since 2007, while its peers have achieved a ratio of 66% in the same time. (A lower ratio is better.) The bank should benefit from rising interest rates, since banks make money from the spread between interest paid on deposits and interest earned on loans.
United Bankshares has a solid yield just north of 4%. Not only that, but the regional bank has increased its dividend payout for 48 consecutive years, a feat that would put it on the list of dividend aristocrats if it were a member of the Standard & Poor’s 500 index.
3. Virtu Financial: 3.14% dividend yield
Virtu Financial is a market making company that provides liquidity to global financial markets. This means that the company helps investors of all types easily open and close positions in stocks and options.
One aspect that I like about Virtu Financial is that it is advantageous when market volatility is high. This is because market volatility widens the gaps between supply and demand, which are the difference between the highest price a buyer will pay and the lowest price a seller will accept. This wider bid-ask spread translates into higher profits for market makers like Virtu.
For example, in 2020, when the pandemic was in its infancy, high volatility in the markets led to wide spreads between bids and asks and as a result Virtu recorded record revenues and profits. . Last year saw a slowdown in volatility, which affected Virtu’s results. However, if 2022 feels like the first month of the year, high volatility should be good for Virtu’s market making business.
4. Morgan Stanley: 2.75% dividend yield
Morgan Stanley has traditionally been known for its investment banking capabilities, but it has undergone a transformation in recent years. Over the past two years, the company has completed significant acquisitions of the E*TRADE trading platform as well as Eaton Vance, a wealth management firm. In total, Morgan Stanley has spent $20 billion to transform its business into a more balanced revenue stream.
Morgan Stanley could be a good stock to own for inflation because of its diversified revenue model. While the investment banking business may not keep pace with strong growth in 2021, the business could benefit from higher rates, which would boost Morgan Stanley’s net interest income. In its fourth quarter earnings call, Chief Executive James Gorman said the company could collect an additional $500 million in net interest income, which depends on the timing of rate hikes as well as loan growth. .
Additionally, like Virtu Financial, the company could benefit from volatile market conditions if trading on its E*TRADE platform increases. It could also see increased demand for wealth management services as investors seek to navigate what could be a tricky market environment with rising inflation and interest rates.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.