3 Inflation-Proof Dividend Stocks to Buy Today

Key Points

These stocks have each boosted their dividend by double digits in the past year.

They have a proven ability to raise prices, in part through innovating around consumer tastes.

Adding one or more of these dividend giants to your portfolio could amplify your long-term returns.

Inflation is running high right now, with the latest measures running at a 5% annual rate, or well above the 2% rate that the Federal Reserve aims for over the long term. Sure, that spike might be mostly driven by temporary trends related to the pandemic, but inflation still counts as a major risk for investors.

With that in mind, let's look at a few dividend stocks that have been boosting their payouts at a faster rate than inflation, and thus provide serious protection against rising consumer prices. Read on for some good reasons to like McCormick (NYSE:MKC), Nike (NYSE:NKE), and Home Depot (NYSE:HD).

1. McCormick

McCormick, the spice and flavorings giant, raised its annual dividend by 10% late last year to mark its 35th consecutive year of increases. That hike was easily funded by strong sales growth, thanks to a popular brand portfolio that now includes Cholula hot sauce in addition to other recently added franchises like French's and Frank's.

Organic sales rose 8% in the fiscal second quarter, and earnings are rising a bit faster, thanks to demand for condiments, hot sauces, and other premium food products. McCormick is planning to roll out significant price increases in the second half of the year that should counter its rising expenses. Income investors should see amplified returns, meanwhile, from that rising dividend payment and aggressive stock-buyback spending in the years to come.

2. Home Depot

Home Depot's 10% dividend increase, announced in late February, gave investors yet another reason to like this world-class retailer. Sure, growth might slow, given that lumber prices have retreated from the spike that had customers paying over 400% more for certain products in Q1. But Home Depot can handle any sales pressure that volatility might cause.

The industry leader is benefiting from big shifts in its sector, including spiking new home demand and higher average spending. Management said back in late May that the boom times continued into the fiscal second quarter, with comparable sales rising 30% on a two-year basis.

Home Depot aims to return 55% of its annual earnings to shareholders in the form of dividends, compared to Lowe's 35%. If that more aggressive posture appeals to you as an investor, this might be just the stock for you. Home Depot will announce Q2 earnings in mid-August.

3. Nike

Nike's dividend yield is a bit below what you could get by owning a diversified total index fund, but the company makes up for that shortcoming in other ways. Executives hiked the dividend by 12% following a challenging 2020 fiscal year, for one. Nike has raised its payout for 19 consecutive years, putting it one step closer to Dividend Aristocrat status (which requires 25 straight annual raises).

Nike can reasonably target faster growth and years of improving profit margins as more of its sales tilt toward direct consumer delivery, rather than the wholesale retailing that has traditionally accounted for most of the business. Meanwhile, two major growth geographies, China and the U.S., can support many years of expansion ahead as people increasingly take up a more active lifestyle.

That attractive growth profile should keep Nike growing much faster than the wider economy while supporting market-thumping investor returns through a wide range of inflationary environments.

Source: The Motley Fool