Besides the pandemic, rising inflation could unsettle stocks. Hence, it would be wise to take the safety net approach in case the market corrects. Dividend investors are winners in an inflationary environment because they have a hedge against inflation.
Purchasing power decreases when inflation is high, and therefore, money loses its value. Since dividend earners receive recurring income streams, they can temper the impact of inflation. Also, dividends are financial cushions when capital gains are hard to achieve in a falling market.
Canadians can boost their incomes instantly by investing in so-called cash cows. TC Energy (TSX:TRP)(NYSE:TRP), Alaris Equity Partners (TSX:AD.UN), and Nexus (TSX:NXR.UN) are the top high-yield stocks to purchase today. The respective businesses are financially healthy, so they could keep you whole on the payouts in down periods.
The energy sector has been the most energized sector since the beginning of the year. Many of its constituents are making their comebacks following the COVID-19 year. The year-to-date gain is an incredible 59.72%. TC Energy investors, for instance, are happy with the 23.95% capital gain thus far in 2021.
Market analysts recommend a buy rating and forecast the share price of $61.48 to climb 12.23% to $69 in the next 12 months. However, if the market slides and the price drops, investors have a fallback in the 5.66% dividend. A $50,000 position in TC Energy will generate $2,830 in extra income or roughly $235.83 per month. The $60.55 billion energy infrastructure company attracts income investors because of its 21-year dividend growth streak.
Alaris, a $794.93 million private equity firm, is a dividend titan. At only $17.53 per share, the dividend yield is a lucrative 7.41%. Any amount you invest will double in less than a decade. Moreover, the generous dividend payer isn’t a mediocre stock. Indeed, it outperforms the TSX year to date (+24.6% versus +15.5%)
The business model is unique. Alaris recapitalizes lower to middle-market companies in North America. Most of the companies it extends up to 75% equity are market leaders. Apart from the proven management team, the clients have historical free cash flows of $3 million or more. However, companies must have a low risk of obsolescence.
In Q2 2021, Alaris achieved a milestone. The $34.9 million revenue was the largest quarterly revenue in the company’s history. Its earnings growth (per unit results) in the first half of the year versus the same period in 2020 was 212%.
Nexus is one of the top performers in the real estate sector. This $556.2 million real estate investment trust (REIT) is relatively new on the TSX but has charmed many dividend earners already. Also, the gain since its debut on February 4, 2021, is 59.9%. Had you invested $25,000 then, your money would be worth nearly $40,000 today.
The real estate stock trades at $12.74 per share and pays a flat 5% dividend. Nexus should have no problems with dividend consistency. It owns and operates high-quality office and retail properties, but more industrial properties. Management is on the lookout for growth opportunities to scale further.
Follow the lead
Follow the lead of dividend earners. They can cope with inflation and accelerate payback on investment in the absence of a capital gain.