Investing in Income Stocks to Combat Inflationary Pressure

Investing in Income Stocks to Combat Inflationary Pressure
Investing in income stocks like Vistry (LSE: VTY) and British American Tobacco (LSE: BATS) can help combat rising inflation rates.

It is expected that the inflation rate will reach 18% next year, and I believe that income stocks are particularly attractive for my investment portfolio. However, few companies will pay enough cash to fully offset the impact of rising prices. But every little bit helps, especially when this money can be used to purchase more stocks in a volatile market.

The performance records of two companies indicate that they believe they should continue to pay large salaries during this economic storm and increase expenses thereafter.

Very inexpensive.

Housing construction company Vistry (LSE: VTY), formerly known as Bovis Homes, has a forecasted dividend yield of 9.4%. This makes it one of the largest payers in the FTSE 250 index. In comparison, the overall return rate of the index is slightly below 3%.

The flagship stock tip service, Share Advisor, of Motley Fool UK has just released the top six stocks that their popular analysts believe are the best buys for investors currently. While timing isn't everything, their average return on previously selected stocks suggests that getting their best ideas early is worthwhile.

Learn more.

In my opinion, there are even more reasons to like this company. Vistry has a strong track record of increasing their annual dividends paid to shareholders. This indicates a healthy and well-managed business, which is exactly the kind of company I want to have in my investment portfolio.

Is it risky to buy from builders during an economic downturn? Well, it's true that the industry is cyclical. There are certainly signs that the real estate market is beginning to decline. The Royal Institution of Chartered Surveyors in the UK recently stated that there are fewer people looking to buy homes, which is starting to affect housing prices.

Despite this, in terms of valuation, Vistry stocks can now be purchased at a level close to their historical low point. Considering the company's reported outperformance in the first half of 2022, a P/E ratio of just 5 seems very cheap. It's no wonder the company has been buying back its own stocks recently.

Is the risk worth the reward here? I believe it might be, although to be on the safe side, I would not hesitate to diversify my investment portfolio.

Monster's Share of Revenue

On my list of potential income shares to purchase is British American Tobacco (LSE: BATS). Like Vistry, the FTSE 100 giant offers an attractive dividend flow. Currently, owning the stock would entitle me to a yield of 6.7%. This is certainly not as generous as the housebuilder mentioned earlier, but it's enough to help ease the pain of rising prices.

Similarly to Vistry, BATS also has an impressive record in improving payments (although not flawless). This is partially due to the consistency in its profits. The addictive nature of its products means that the company can be fairly certain of how many cigarette packs it will sell each year, at least compared to other consumer stocks.

Obviously, no dividend stream can be guaranteed. People also need to consider that tobacco consumption has been on a long-term downward trend and the industry is always susceptible to regulatory interference. Although I am highly focused on building long-term wealth, I do recognize that the stock price of British and American Tobacco has already risen by 25% in 2022.

Returning to the topic, the valuation of this stock is still at nine times the expected earnings. Therefore, even if the momentum does slow down in the coming months, it is difficult to believe that the stock price of British American Tobacco will collapse.

Why this £5 stock could soar: Are you searching for growth stocks in the UK? If so, get this free, no-obligation report while it's still available. You'll discover what we believe to be one of the fastest-growing stocks of the next decade...and this company's performance is indeed impressive. In 2019, it returned £150 million to its shareholders through buybacks and dividends. We believe its financials are as solid as anything we've seen.

Since 2016, the company has experienced a 31% increase in annual revenue. As of March 2020, one of its senior directors holds 25,000 shares valued at £90,259. The company's operating cash flow has also grown by 47%.

Translation: Statement

This article is compiled from third-party information and is intended solely for exchange and learning within the industry.

This article does not represent the views of 2FIRSTS, and 2FIRSTS cannot confirm the truthfulness or accuracy of the article's content. The compilation of this article is solely intended for industry-related exchange and research.

Due to limitations in translation ability, the compiled article may not fully express the same meaning as the original. Please refer to the original text for accuracy.

2FIRSTS maintains full alignment with the Chinese government regarding any domestic, Hong Kong, Macao, Taiwan, or foreign-related statements and positions.

The copyright of the compiled information belongs to the original media and author. If there is any infringement, please kindly contact us for removal.

This document has been generated through artificial intelligence translation and is provided solely for the purposes of industry discourse and learning. Please note that the intellectual property rights of the content belong to the original media source or author. Owing to certain limitations in the translation process, there may be discrepancies between the translated text and the original content. We recommend referring to the original source for complete accuracy. In case of any inaccuracies, we invite you to reach out to us with corrections. If you believe any content has infringed upon your rights, please contact us immediately for its removal.