If there’s a silver lining to be found in the current inflationary environment, it is that Social Security beneficiaries will, in 2023, receive a record cost-of-living adjustment of 8.7%. The adjustment will result in an average of $140 more per month for qualifying people who collect Social Security benefits. While many people will put this additional money towards their daily living expenses, some may find they have a little extra money to invest. Below, we suggest three solid, reliable stocks to buy with the Social Security increase.
Icahn Enterprises (IEP)
When you compare that to the average dividend yield of 1.82% among stocks listed in the benchmark S&P 500 index, the gap is pretty mind-blowing. Currently, IEP stock pays out a quarterly dividend of $2 a share or $8 per share each year.
In addition to its gigantic dividend, Icahn Enterprises is also a comparatively stable stock that doesn’t gyrate a great deal. This year, for example, the share price is up a modest 3% in a bear market during which the S&P 500 is down 22% on the year. Over five years, IEP stock is down a slight 2%.
Icahn Enterprises’ combination of a massive dividend yield and relative stability makes it an ideal holding for retirees who are collecting social security. The shareholders of Icahn Enterprises essentially own part of a holding company that is run by famed investor Carl Icahn and his son, Brett. The company has invested in a number of businesses that could be viewed as boring by some but are not prone to the wild highs and lows from which newer start-ups often suffer.
Currently, Icahn Enterprises owns businesses such as Pep Boys, a chain of automotive service centers; ACF Industries, a manufacturer of railroad rolling stock; and WestPoint Home, which makes towels, bedding and pillows. Again, those are not glamorous companies. But they are stable. And no one can complain about Icahn’s dividend.
Berkshire Hathaway (BRK.A / BRK.B)
Speaking of holding companies managed by famous investors, how about Berkshire Hathaway (NYSE:BRK.A / NYSE:BRK.B), the massive conglomerate run by Warren Buffett? For good reason, Berkshire Hathaway has been called by many analysts and leading investors one of the best retirement stocks in the world.
The company run by Warren Buffett is heavily diversified, owning a number of private businesses in sectors ranging from insurance and railroads to fast-food restaurants and retail jewelry outlets. Berkshire also manages one of the biggest stock portfolios in the world, currently worth nearly $330 billion.
Berkshire is among the largest shareholders of Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC) and Coca-Cola (NYSE:KO),. Like Icahn Enterprises, Berkshire Hathaway has a track record of outperforming the broader market during downturns. This year, BRK.B stock is down only 6% while the blue-chip Dow Jones Industrial Average has sunk 15% in 2022.
If there’s a downside to Berkshire Hathaway’s stock, it is that it does not pay a dividend. Buffett has consistently refused to stribute any dividends. However, the Oracle of Omaha is fond of repurchasing his own stock, buying back $27.1 billion of the shares last year.
Central Securities (CET)
While not as well-known as either Icahn Enterprises or Berkshire Hathaway, Central Securities (NYSEAMERICAN:CET) is a well-managed, highly diversified, closed-end fund that has many benefits for investors seeking stocks to buy with their Social Security increase.
In operation since October 1, 1929 (at the start of the Great Depression), Central Securities essentially operates as a holding company. Like IEP and BRK.B, Central Securities has a number of longstanding investments in both public and private companies. And also like Icahn and Berkshire, Central Securities tends to invest in reliable, blue-chip businesses.
Some of Central Securities main investments include the Plymouth Rock insurance company, oil and gas company Hess Corporation (NYSE:HES), and credit card giant American Express (NYSE:AXP). Central Securities has held some of its current investments for 40 years.
CET stock also pays a strong dividend that currently yields 10.6% The company pays its dividend every six months, and the payout at the end of each year tends to be the larger of the two that are issued. In all, Central Securities paid out $3.75 per share to investors last year.
And, while he is not as well-known as either Carl Icahn or Warren Buffett, Wilmot Kidd III, the long-time president of Central Securities who stepped down earlier this year but remains chairman of the board, is a legend in his own right. With Kidd at the helm, CET stock returned an annualized 14.5% to investors over a 47-year period. This year, the stock is down 20%, nearly matching the decline of the S&P 500.
On the date of publication, Joel Baglole held long positions in AAPL, BAC and CET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.