To The Moon

Cash In With 2 High-Yield Dividend Stocks: Passive-Income Stocks To Fight Inflation

Summary

The Consumer Price Index (CPI) jumped 9.1% in June, and many investors are turning to high-yielding dividend stocks to battle portfolio losses.

This article highlights two dividend-paying stocks with excellent fundamentals, amazing profitability, and strong dividend safety grades. The yield on each stock pick is over 5%.

Both stocks experienced a decline, like most commodities, amid the June price destruction. This may be a good opportunity to buy on the dip.

Recession Fear Is On the Rise

75 basis point hike not seen in more than three decades have surfaced, and Canada’s Central Bank made the surprise 1% move last week, raising further concerns. While sky-high inflation needs to be tamed, a hike of this magnitude could push the U.S. economy into recession.

The Consumer Price Index (CPI) jumped 9.1% in June, and many investors are turning to high-yielding dividend stocks to battle portfolio losses. We have two high-yield dividend stocks with Strong Buy ratings. They are fundamentally strong with solid earnings projections, yield above 5%, and can make for an excellent investment to the rescue.

2 Dividend Stocks with High Yields to Invest In

I’ve said it before. Not all dividend stocks are created equal. Since yield is a payout relative to share price, which does not always mean the company is in great financial shape, when picking high-yield stocks, investors must dig deeper into its fundamentals. These two stocks have strong financials and great overall fundamentals that complement their high yields to stand the test of time.

1. LyondellBasell Industries (NYSE:LYB)

Market Capitalization: $27.71B

Quant Rating: Strong Buy

Dividend Safety Grade: B+

Forward Dividend Yield: 5.62%

A unique materials company that produces commodity chemicals, LyondellBasell Industries (LYB) is one of the largest global plastic, chemicals, and refiner, offering agricultural solutions, recycling, and advanced packaging. Involved in producing and packaging essentials like food, hygiene, healthcare, and consumer staples, LYB has a 70-year legacy of innovation and product technologies using chemicals and high-performance plastic compounds.

LYB Stock Growth & Profitability

Presenting its strongest quarters since 2015, LYB generated $8.6B from operating activities, including an 88% cash conversion ratio, providing the firm 26.9% free operation cash flow yield.

The executive team is applying LYB’s cash into growth investment, debt reduction, and growing its dividend. Following stellar Q1 results, LyondellBasell offered a special dividend at $5.20 and raised its quarterly $1.13 share by 5.3%.

Capitalizing on high demand post-pandemic and pricing competition in the energy and feedstock categories, LyondellBasell has stepped up its earnings, increasing its EBITDA and showcasing a Q1 EPS of $4.00 beat by $0.45 and revenue of $13.16B beat by $500.50M, resulting in 16 analyst FY1 UP revisions over the last 90 days. LYB improved its incident rate by 40% this year with a focus on safety improvements. In addition, the company’s goal of reducing emissions by 30% by 2030 is a significant driver in the push for sustainability. After signing two U.S. renewable energy power deals in Texas for an estimated 628K MWh/year of clean power, Lyondell is looking to be a dividend investment for the future. Historically, commodity chemical stocks have been good inflation fighters. Here is a Quant ranked list of Seeking Alpha Top Commodity Chemicals Stocks.

2. Dow Inc. (NYSE:DOW)

Market Capitalization: $36.08B

Quant Rating: Strong Buy

Dividend Safety Grade: B-

Forward Dividend Yield: 5.65%

Dow Inc. (DOW) is another top commodity chemical company taking advantage of the current environment and competitive pricing. DOW is a leader in innovative and sustainable packaging solutions. A spinoff of popular DuPont (DD), formerly the world’s largest chemical company in terms of sales, DuPont was known for its chemical creations like Kevlar, Teflon, Mylar, and Lycra.

As concerns surrounding the Fed’s decision on monetary policy increased fears about decreasing demand and spiking fuel and commodity prices, Piper Sandler downgraded DOW and LYB. In addition, investor fears prompting a slide in their share prices. Similar to LYB, the stock reached highs in April and May. But given the stock is trading near 52-week lows, it maintains a strong buy rating. It has excellent fundamentals, and I believe this stock is an optimal pick, especially at its current valuation.

DOW Growth & Profitability Grade

As the war in Ukraine and the effects of Russian gas and other imports affects industries and nations, many companies will feel the impact of cuts into profit margins. At the same time, U.S.-based DOW stands to benefit and has seen an increase in revenue of 22%.

“Dow has an ample supply of affordable natural gas to power its American operations available. The price of natural gas in North America has every chance of remaining low relative to European prices for the foreseeable future, and the odds of outright disruptions are arguably low. Dow is therefore a buy,” writes Seeking Alpha Contributor Zoltan Ban.

Investors want their stocks to make them money, and LYB and DOW are proving to be stocks that showcase their strong upside potential, possessing high yields and excess cash flow. Consider both for a portfolio. In addition to identifying Commodity Chemicals to combat inflation, many material stocks are also incredibly defiant during periods of high inflation. Here is a quant-ranked list of our Top Materials Stocks.

Conclusion

Capital preservation or off-setting inflation is what many investors want in this environment. When stock markets rise or fall, buying high-yield dividend stocks offers investors an option where their investment should be able to thrive in both environments without sacrificing quality or growth.

LYB and DOW are win-wins for value and growth investors. Not only do they both offer forward dividend yields of +5%, both possess solid growth outlooks, are undervalued, and should provide investors a steady income stream in this highly volatile market. In addition to solid dividend safety grades, each has significant cash for operations coupled with growth and profitability to ensure shareholders that these stocks’ dividend payout should remain consistent.

Source: https://seekingalpha.com/article/4524111-2-high-yield-dividend-stocks-passive-income-stocks-to-fight-inflation?mailingid=28455708&messageid=must_reads&serial=28455708.3362495&source=email_must_reads&utm_campaign=Must+Read+July+21%2C+2022&utm_content=seeking_alpha&utm_medium=email&utm_source=seeking_alpha&utm_term=must_reads