Everyone is searching around for places to put their money. But there does not appear to be anywhere obvious to put it. I’ve been thinking about dividend stocks I can add to my portfolio that will give me some continued protection again inflation, whilst also returning my some cash to re-invest during the market downturn. I thought there may be others interested so thought I would share here.
I landed on two ideas, neither revolutionary.
1.) CEY – Centamin PLC
Centamin is a gold miner, that actually turns a profit, and pays out a ton of cash via its dividend. Its current yield stands at around 7.5% although I should note the dividend has been reduced in years passed. This is not a romantic or perfectly sculptured dividend play. The reason I mention it, is that gold has long been seen as a hedge against inflation, admitedly this has not played out quite as much as some gold bulls hoped in 2022. But gold should at least hold it’s value, and being a large gold miner that is not reliant on external capital will put CEY in an excellent position moving forward.
2.) Unilever – ULVR
Another obvious play that, IMO, is a much safer bet than CEY. ULVR owns some of the most well known household brans (think – Fairy Liquid), and thus it has something that other companies simply don’t currently – pricing power.
People always need cyclical consumables, and they typically continue to buy what they know, even in a recession. Fairy liquid might be more expensive than the home brand equivalents, but, as anyone who has used the alternatives will know, it lasts a hell of a lot longer.
Dividend yield stands at around 3.7%, but the difference here is you can bet your bottom dollar the dividend will grow significantly over time. Some analysts reckon they could grow their dividend at up to 10% per annum for the next 10 years. This could give you a “safe stock” for a recession, that could also end up yielding you far more than just 3.7%.
To give you an example of the power of dividend growth: after 30 years invested in the Washington Post, Warren Buffets quarterly dividends covered his initial stake in the company. That is the power of earnings / dividend growth over a long period of time. Mohnish Pabrai’s book “The Dhando Investor” will give you an excellent insight into this story in far more detail.
I will keep looking for opportunities to protect the downside, and find the updside. If you want to follow along on my journey, then please follow the blog!