Dividends4Life: Dividend Stocks Can Protect Against Inflation

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Dividend Stocks Can Protect Against Inflation

Posted by D4L | Monday, November 19, 2012 | | 0 comments »

While placing money in a savings account may seem like the safest investment, banks don't pay nearly enough interest these days to compensate investors for inflation. In fact, interest rates are at record low levels, making now one of the worst times in history to let money sit in a savings or money market account (that goes for CDs too). Thus, savings are eroded in terms of future buying power, as product prices creep up over the long-term.

Dividend stocks provide a great partial hedge against inflation, providing a tangible return and cash flow to the shareholder. By selecting individual stocks with higher dividend yields - but that are still stable companies - it is also possible to significantly outpace inflation. Since dividend yields and inflation are in constant flux, it is sometimes necessary to exchange one stock (or several) for another in order to continue outpacing inflation. In certain years, inflation may win, but over the long-term, by consistently picking high quality dividend stocks, it is possible to generate a higher yield than inflation.

Source: NASDAQ

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