How do you find stocks to buy to beat inflation amid uncertainty in the financial markets? The inflation rate in the U.S. is near 8% and is at its highest level in 40 years. The Federal Reserve has made the bold move to raise the key interest rate by 75 basis points, a move that was last made back in the mid-90s to fight inflation.
More interest rate hikes are coming by the end of 2022. The key to offsetting the negative impacts of inflation is to find stocks with a dividend yield greater than the rate of inflation that are also value stocks with plenty of upside potential.
As we are in a bear market, the high dividend yields that the following seven stocks to buy offer will beat inflation, offering a positive real return. These stocks are undervalued, so as they converge towards their intrinsic value, investors will see capital appreciation gains too. This means that investors will get rewarded two times.
|CRF||Cornerstone Total Return Fund||$9.22|
|SBLK||Star Bulk Carriers||$24.62|
|KF||The Korea Fund||$24.01|
|CUBA||The Herzfeld Caribbean Basin Fund||$3.95|
|GF||The New Germany Fund||$8.74|
|OCCI||OFS Credit Company||$9.23|
Cornerstone Total Return Fund (CRF)
Cornerstone Total Return Fund (NYSE:CRF) is a closed-ended equity mutual fund. It is focused on value and growth stocks as well as ETFs.
It is important to check the premium or discount to NAV (net asset value) when investing in a mutual fund. Cornerstone Total Return Fund has a NAV of $7.11. That’s a 23% discount.
The forward dividend yield of 24.5% is a great reason to invest in this fund and collect dividends while the stock market is highly volatile. The dividend yield is triple the current inflation rate.
Star Bulk Carriers (SBLK)
Star Bulk Carriers (NASDAQ:SBLK) is a shipping company with a fleet of 128 vessels transporting dry bulk goods.
This shipping stock offers a forward dividend yield of 20.86% and trades at a price-to-earnings ratio of 3.1.
Analysts are very bullish on SBLK stock, giving it a one-year estimate target of $37.17, an upside potential of approximately 49%. The company has very strong fundamentals with a gross margin of 55.66%, an operating margin of 51.49% and a net margin of 47.68%.
This shipping stock has ignored the stock market selloff in 2022 as it has gains of nearly 11% year-to-date. It already has materialized the ideal scenario of providing capital gains and a rich dividend yield as I mentioned at the beginning of this article. This momentum could continue throughout this year as free cash flow has gained traction in 2021 and particularly in 2021, when it grew to $637 million.
Dorian LPG (LPG)
Dorian LPG (NYSE:LPG) transports liquefied petroleum gas through its LPG tankers worldwide with its fleet of 22 very large gas carriers (VLGCs).
There is a similar bullish thesis with Star Bulk Carriers as the two shipping companies have many things in common and are value stocks. LPG stock trades at a P/E ratio of 7.9 and it offers a forward dividend yield of 69%.
This shipping stock is up nearly 17% in 2022, and the financials support this rally. The company has been profitable for many years. Revenue grew by 111% in 2020, and though its growth has slowed down moderately, the firm is generating very consistent and positive free cash flows. In the fiscal year ending March 2022, Dorian LPG generated $103.44 million of free cash flow, down 37.74% from 2021.
The forward price-to-book of 0.63 makes LPG stock an undervalued stock with a massive dividend yield. It has very high odds of smashing inflationary pressures.
The Korea Fund (KF)
The Korea Fund (NYSE:KF) is a mutual fund that invests in Korean public equities.
The focus is on Korean companies with not only solid long-term growth characteristics, but also attractive quality and valuation prospects.
There are 54 holdings, and the top 10 holdings include companies like Samsung, SK Hynix, LG Chem, Kia and SK Innovation. As of April 30, 2022, the sector with the most weight was information technology with a weight of 33.7%, with utilities coming in last place at 0.2%.
The gross and net expenses per year are 1.12%. The fund offers a forward dividend yield of 36%.
The Herzfeld Caribbean Basin Fund (CUBA)
The Herzfeld Caribbean Basin Fund (NASDAQ:CUBA) is an equity mutual fund. While it invests in U.S. markets, it’s focused on companies that are likely to benefit from developments in Caribbean Basin countries, such as Cuba, Jamaica, Trinidad and Tobago, the Bahamas and the Dominican Republic, to name a few.
The semi-annual report dated Dec. 31, 2021, showed that the geographic allocation of net assets was nearly 60% in the U.S., 17% in Mexico, 13% in Puerto Rico and 6% in Panama, while other countries had a much lower weight.
A forward dividend yield of nearly 26% makes this fund an interesting way to beat inflation.
The New Germany Fund (GF)
The New Germany Fund (NYSE:GF) is an equity mutual fund that invests in small- and mid-cap companies in Germany.
Currently, GF has a NAV of $10.01. That’s a discount of 11.6%.
The fund has 78 holdings with total net assets of $224 million. As of March 31, the sector with the largest weight of 31% was industrials, followed by materials and information technology, with each of them weighing 10%. The two sectors with the lowest weight of 1% were utilities and energy.
Among largest holdings were companies like Beiersdorf, Rheinmetall, Scout24, Thyssenkrupp and Commerzbank AG.
OFS Credit Company (OCCI)
OFS Credit Company (NASDAQ:OCCI) is a “non-diversified, closed-end management investment company” with the investment objective to “generate current income, with a secondary objective of generating capital appreciation primarily through investment in collateralized loan obligation (‘CLO’) equity and debt securities.”
As of Oct. 31, 2021, the top industries of underlying obligors included healthcare and pharmaceuticals at 11% and high tech industries at 10%.
The maturity distribution of underlying obligors was mostly focused on the years 2024-2028, with the year 2028 having the largest weight of 28.7%. The spread distribution of underlying obligors was mostly in the range of 3%-4% with a weight of 45.12%.
This is a technical fund, but the forward dividend yield of 23% makes it a nice play to beat inflation.
On the date of publication, Stavros Georgiadis, CFA 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.