Inflation is all over the news. Whether it’s business, consumer or political news, we simply cannot escape it, and folks will continue to debate it.
The Labor Department recently revealed that consumer inflation had cooled off in October. Specifically, the Consumer Price Index (CPI) was flat in October and up 3.2% in the past 12 months. Economists had forecast CPI to rise 0.1% to 3.3% in the past 12 months.
The Labor Department also announced that wholesale inflation also decelerated in October. The Producer Price Index (PPI) decreased 0.5% in October – its largest monthly decrease since April 2020. Economists had anticipated PPI to decline just 0.1% in October. PPI increased 1.3% in the past 12 months.
While inflation is cooling down, it is still a little elevated. So, folks should continue to turn to dividend-paying stocks as good hedges against inflation. But before you jump into any dividend-paying stock, I should warn you that not all dividend stocks are created equal. Before I explain why, let’s take a step back and talk about what exactly a dividend is.
What Is a Dividend?
A dividend is a distribution from a company’s earnings paid directly to a class of its shareholders. It is up to the company as to when (or even if) it is paid. The dividends tend to be paid out on a quarterly basis, but some companies will pay a semi-annual or annual dividend. Company management will always announce when it will be paid – including your deadline to buy the stock in order to receive this payout – and what the dividend will be per share.
Now, the dividend yield varies depending on the company’s actual dividend and where the stock price is at the time. In some cases, you may be looking at a double-digit dividend yield. But as attractive as a double-digit dividend yield may sound, I recommend you pump the brakes before investing. Chasing dividend yields alone can be downright dangerous.
Stocks are not like Treasury bonds or a savings account: There’s no guarantee that you will get your money back. There’s also no guarantee that company will continue paying a dividend. If you choose poorly, you could lose your capital as the stock price falls. Or, that nice juicy dividend could be slashed.
In most cases, dividend yields are tantalizingly high for a reason (the stocks are cheap and rightly so) – and are simply not supported by the fundamental earnings power of the business.
This is why my Dividend Grader is so important. Just like my Portfolio Grader, it uses my proprietary formula to put each stock through a rigorous test, crunching reams of data against a set of criteria I’ve created. Specifically, Dividend Grader measures a dividend stock’s Dividend Trend, Dividend Reliability, Forward Dividend Growth and Earnings Yield. All this comes together to deliver you a Total Grade. Just like Portfolio Grader, an A- or B-rating is considered a “Buy,” a C-rating a “Hold,” and a D- or F-rating a “Sell.”
Here are 10 examples of dividend stocks with high dividend yields but also hold an F-rating or a D-rating in Dividend Grader, indicating that you should stay far, far away:
|Dividend Yield (%)
|Altria Group, Inc.
|CME Group Inc. Class A
|Duke Energy Corporation
|Micron Technology, Inc.
|Philip Morris International Inc.
As you can see, each company has a huge double-digit dividend yield (the first on the list even has a triple-digit dividend yield!), but it also receives an “F” rating from Dividend Grader, making these stocks all Strong Sells. This is because their dividend trend, dividend reliability, forward dividend growth and earnings are very, very poor.
Now, I don’t want to scare you away from dividends – far from it. I just want you to be aware of the potential risks. Investing in dividend stocks can also be very lucrative. If you get it right, you can make a fortune. Fundamentally strong dividend stocks pack a one-two punch of share price appreciation and a steady stream of income… with payouts that can be twice or five times what you get from a Treasury bond or a bank.
The Crème de la Crème of Dividend Stocks
My Growth Investor service recommends the crème de la crème of dividend growth stocks. I call this my Elite Dividend Payers Buy List. A stock only makes it to this special list if it receives a “AA” rating, which means it must have an “A” rating in both Dividend Grader and Portfolio Grader. So, not only does the stock boast a solid (and reliable) dividend, but strong fundamentals to boot!
In fact, I recommended one brand-new coveted AAA-rated stock in my latest Growth Investor Monthly Issue. The AAA-rating indicates an A-rating in Dividend Grader, an A-rating in Portfolio Grader and an A Quantitative grade. In other words, it offers the perfect blend of income, growth and persistent institutional buying pressure.
It also has a solid dividend yield, great long-term potential and is still trading below my recommended buy limit. You won’t want to miss out on this exciting opportunity, so make sure to sign up here so I can reveal the name to you.
P.S. The big tech companies recognize the impact that AI is having, with each focusing on and infusing it into their companies as they look ahead to the next quarter and even next year. And just as they see the opportunity on the horizon, I firmly believe that the AI boom we’re witnessing will be the biggest opportunity of the next decade.
To take advantage, all you have to do is apply my “Billion Dollar Tech Blueprint” to the AI market and you could turbocharge your investment portfolio in a major way.
And it will work best if you act now while the majority of AI-related stocks are still small and relatively unknown. The AI boom is just getting started and you don’t want to miss out.
That’s why I created this urgent message to share with you how my time-tested “Billion Dollar Tech Blueprint” can properly position your portfolio for the chance to make the most money possible from the AI Revolution.