- Dollar Tree (DLTR): High inflation is helping this discount retailer deliver solid earnings growth.
- Mondelez International (MDLZ): The market may be overestimating how much inflation will impact this snack company’s future results.
- Altria Group (MO): Inelastic demand for tobacco products enables this cigarette giant to pass rising costs onto its customers.
- Nutrien Ltd. (NTR): Investors may be underestimating how long high prices for potash and nitrogen will last.
- UnitedHealth Group (UNH): Recession and inflation-resistant, this healthcare powerhouse will continue to report strong results.
- VICI Properties (VICI): The casino landlord has inflation-protection baked into its lease agreements.
- ExxonMobil (XOM): Continued high inflation means high oil prices.
With the latest consumer price index coming in at a staggering 8.5%, it’s safe to say inflation is something that remains top of mind. Not just among U.S. households, squeezed by a higher cost of living. As this issue continues, investors are on the lookout for inflation resistant stocks. Such names stand to thrive in this environment.
Sure, you may think it’s too late to start diving into inflation plays today. Many of the stocks listed below have already gone up by meaningful amounts in recent months. With some commentators stating that inflation has peaked, you may be concerned you’re getting into these names too late, and at too high of a price.
Then again, maybe not. Even as there’s hope it will not continue to get worse from here, it may be a while before it falls back to the Federal Reserve’s 2% target. With this, these seven inflation resistant stocks likely have more runway:
Inflation Resistant Stocks: Dollar Tree (DLTR)
Up nearly 22% in 2022, Dollar Tree (NASDAQ:DLTR) has seen a boost from its inflation-resistant bona fides. This discount retailer is expected to see meaningful earnings growth this year. Rising prices are driving consumers to its stores, instead of pricier retail options.
Per analyst consensus, the company is expected to earn around $7.97 per share this fiscal year (ending January 2023). That’s a big jump from the $5.80 per share in earnings reported for DLTR stock in FY22 (ending January 2022).
But while it’s popped on the prospect of high inflation giving its earnings a jolt, that’s not to say it’s too late to buy. Shares continue to sport a reasonable valuation (forward price-earnings ratio of 21.2). Better yet, high earnings growth is expected to carry on into the next fiscal year (up another 13.2%, to $9.02 per share).
Mondelez International (MDLZ)
Back in November, it was uncertain whether Mondelez International (NASDAQ:MDLZ) could pass rising costs onto the consumer. The confectionary and snack foods giant (owners of brands like Cadbury, Oreo and Ritz) raised its prices in order to account for higher costs (ingredients, labor and shipping).
So far, inflation has had a moderate impact on its operating performance. Back in January, The company reported a slight quarterly earnings miss. MDLZ stock pulled back sharply in late February/early March, due to the Russian invasion of Ukraine. Considering all this, you may think it’s odd I would consider it one of the inflation resistant stocks.
Even so, while it is not exactly crushing it today, the market may have priced in inflation headwinds too much into Mondelez shares. The company’s price increases only kicked in starting late last year. It’s possible the company’s profitability figures improve as 2022 plays out.
Altria Group (MO)
If you’re OK with the controversy surrounding its business (tobacco products), there are many reasons to like Altria Group (NYSE:MO) stock. For starters, it’s a value play, with a low forward P/E ratio (11.3). It’s also a high-yield stock, sporting a 6.5% dividend yield. Not to mention, it’s also a low volatility stock.
Along with these positives, Altria, parent company of Marlboro maker Philip Morris USA, it’s an inflation resistant name as well. Cigarettes benefit from inelastic demand. This company is able to pass along rising costs onto its consumers.
Investors this year have quickly caught on to the appeal of owning this sin stock lately. So far in 2022, MO stock is up by double digits, and has recently hit a new multi-year high.
That said, Atria is still cheap, still offering a high dividend yield, and with modest earnings growth. Consider it a buy.
Inflation Resistant Stocks: Nutrien Ltd. (NTR)
Supply shocks stemming from the Russia/Ukraine conflict have been a boon for shares in Nutrien Ltd. (NYSE:NTR). A major producer of potash, nitrogen and other crop nutrients, this Canada-based company stands to see a big earnings windfall.
Earnings per share for NTR stock is expected to more than double this year, from $6.23 to $13.68. Not surprisingly, shares have already skyrocketed ahead of this happening. Since the start of Russia’s invasion, the stock has bolted from around $75 per share to around $110.
Given fertilizer prices could come back down, it makes sense to be concerned high-flying Nutrien could fall back down to earth. But with no end in sight for the war, and other factors playing a role in high crop nutrient prices, Nutrien’s earnings could stay elevated for longer-than-expected. This could give the stock more runway.
UnitedHealth Group (UNH)
Just like how it’s a recession-resistant sector, healthcare is also a sector resistant to inflationary pressures. This explains why so many have already rotated into healthcare stocks, including UnitedHealth Group (NYSE:UNH) stock.
Yet like many of the inflation-resistant stocks listed above, it may not be too late to make it a buy. A diversified provider of health insurance and related services, it’s long been a top-performing stock. It has a forward valuation (24.7x) that you can say is pricey relative to peers. Still, paying up for this high quality name could just well be worth it.
Recession and inflation-resistant, UnitedHealth Group stands to continue delivering strong earnings growth. Analyst estimates call for EPS to rise around 13.6% this year, and around 14.1% next year.
Strong performance, even during tough times, will likely pave the way for solid gains for investors buying into the stock today.
VICI Properties (VICI)
A casino real estate investment trust, VICI Properties (NYSE:VICI) may at first seem like an odd name to include on this list. After all, isn’t high inflation, and the possibility of a recession, bad news for consumer discretionary sectors like gaming?
Yes, these factors could mean trouble ahead for gaming operators. Yet for the company leasing them real estate to conduct gaming, the impact may not be so severe. The rents collected from its casino tenants are not based on how well the house is winning (or losing). In fact, even during the lockdown period, when casinos were closed, casino tenants continued to pay their rent.
Also, as my InvestorPlace colleague Tezcan Gecgil pointed out last month, 97% of its rental agreements have escalators based on CPI. That means the ability to keep up with inflation, maintaining (and perhaps someday, growing) its current dividend payout (5.1% yield).
Inflation Resistant Stocks: ExxonMobil (XOM)
When talking about stocks to buy to ride out high inflation, you can’t forget oil & gas plays. There are many options out there, but sticking with a well-known name like ExxonMobil (NYSE:XOM) may be the way to go.
XOM stock has seen a big run-up in price over the past two years. First, due to oil’s post-pandemic recovery. Oil’s comeback enabled it to maintain, and slightly grow, its dividend. Then, due to Russia tailwinds sending crude oil prices to as much as $126.42 per barrel. As oil has pulled back, you may think you have missed the boat.
Yet if high inflation persists, oil prices will likely remain high. The market may be assuming oil will “return to normal” much sooner. Also, as Louis Navellier argued earlier this month, the company’s cost-cutting and capital allocation strategy could create shareholder value, no matter where oil prices go from here.
On the date of publication, Thomas Niel held a LONG position in MO stock. He did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.