Inflation reduces the purchasing power of the money that you save up in the bank. While it’s good to save money and build toward long-term financial goals, it loses value every year. A $20 bill got you a lot more in the 1980s than it would get you today. In fact, a $20 bill just five years ago meant a lot more back then than it does right now.
While inflation will continue to grow as long as the government continues to print money, there’s hope for investors. Some corporations continue to beat inflation with high profit margins and double-digit dividend growth rates. These two factors can preserve your capital and get you closer to your long-term financial goals.
Wondering which consumer plays can help you thwart inflation? These are some of the top investment opportunities to consider. Each company featured on this list has a net profit margin above 20% and rising revenue.
Visa (V)
Visa’s (NYSE:V) business model is built to beat inflation. The prices of goods and services rise during inflationary periods, but Visa continues to earn a fixed percentage of each transaction. If the cost of goods and services increases by 10%, Visa’s revenue stands to go up by 10%.
Lately, Visa hasn’t been outperforming the stock market, but it’s still delivered a 49% gain over the past five years. The fintech firm’s profit margins are exceptional and came in at 53.1% in the most recent quarter. Revenue and net income both increased by 10% year-over-year (YOY) in that quarter.
Not only does the company’s business model shield it from inflation, but also its dividend growth rate exceeds the rate of inflation. Visa poured $3.8 billion into stock buybacks and dividend distributions. The firm has been giving out a quarterly dividend of 52 cents per share. That’s a 15.6% growth rate from last year’s quarterly dividend of 45 cents per share.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) isn’t only about business software and artificial intelligence (AI). While those segments deliver plenty of sales, the company also makes a lot of revenue from gaming and social media. Microsoft owns many brands, including LinkedIn and Xbox. The company’s Activision Blizzard acquisition has been fueling revenue growth in the gaming category.
In Q3 of fiscal year 2024, revenue increased by 17% YOY while net income jumped by 20% YOY. Additionally, Microsoft pays out a quarterly dividend of 75 cents per share, which is a 10.3% increase from last year’s dividend. Furthermore, the tech conglomerate is due to announce a new dividend hike this September.
Microsoft has been a solid buy-and-hold investment for several years. Shares are up by 23% year-to-date (YTD) and have gained 233% over the past five years. Many Wall Street analysts believe that the stock can rally to new highs. The average price target suggests a 12% upside. The most bullish price target of $600 per share implies a 31% gain is possible.
JP Morgan (JPM)
JP Morgan (NYSE:JPM) is one of the most established financial institutions on the planet. It’s too big to fail, but unlike most bank stocks, it’s actually performing well.
The stock has gained 19% YTD and has soared by 81% over the past five years. JP Morgan currently trades at a 12 P/E ratio and offers a generous 2.24% yield. In addition, the bank is approaching a $600 billion market cap.
Moreover, many Wall Street analysts are bullish on the stock. It’s rated as a strong buy among 22 analysts and has a projected 4% upside. The highest price target of $231.19 per share suggests that the bank can gain an additional 13% from current levels.
JP Morgan reported an impressive 17% in return on equity in the first quarter. Revenue increased by 11% YOY while net income jumped by 6% YOY. JP Morgan closed the quarter with a 33.5% net profit margin. Also, the financial firm issued a quarterly dividend of $1.15 per share. That’s a 9.5% YOY improvement from the company’s recent dividend of $1.05 per share. The bank continues to outperform inflation while delivering long-term gains for investors.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
