Investors are increasingly becoming aware that money stashed in a savings account, or even in a Cash ISA, will struggle to keep up with today’s levels of inflation. So where should you turn?
I think the clear answer is to invest in shares in top UK companies, but even then I’d say you need to set one clear priority. Warren Buffett famously relies on his number one rule of investing, “never lose money”. But if you don’t beat inflation then you will lose money in real terms.
Here are two companies that have been helping their shareholders beat inflation, and I reckon they’ll continue to do so.
International success
Portmeirion Group (LSE: PMP), a pottery company based in Stoke-on-Trent (and founded by the daughter of the designer of the eponymous Italianate Welsh village), has a solid track record of growing its earnings and paying progressive dividends.
Those dividends have been providing yields of better than 3% per year, and the payment of 34.66p per share announced Thursday for the 2017 year amounts to a 3.3% yield on the current share price of 1,049p at the time of writing. That alone would keep your investment pot running ahead of inflation, especially as the latest dividend was lifted by 7.5%, which is way ahead of inflation that’s currently running around 3%.
And though it’s had its ups and downs, the share price has gained 60% over the past five years, providing a total return of better than 75%.
The company, which owns the Royal Worcester and Spode brands (both of which are particularly popular in the USA), saw revenue climb by 10.6% during the year, with pre-tax profit up 13% and earnings per share up 9.2%. That seems easily enough to support the dividend, and with cash generation turning 2016’s year-end net borrowings of £2.3m into net cash of £1.6m, I view forecast rises for the next two years with confidence.
Growth plus dividends
Marshalls (LSE: MSLH) manufactures a range of materials and products for the home improvement and home building markets, supplying wholesale to a large number of builders and retailers among others. And it’s been a very profitable business for years.
Earnings per share more than trebled between 2013 and 2017, and over the same period the annual dividend roughly doubled to last year’s 10.2p per share. That provided a yield of 2.2%, and forecasters are predicting rises for this year and next which would lift the payment 28% by 2019, for a yield of 3%.
EPS has grown in double-digits for each of the past five years, and that’s likely to slow, which is expected, as growth can’t go on at that pace for ever. But I still see Marshalls as an attractive long-term investment which should eventually comfortably beat inflation. In fact, over the past five years, shareholders have seen their investments almost quadruple in value.
The company is strongly cash generative, and has the ability to grow by acquisition too — it acquired pre-cast concrete manufacturer CPM Group in November for £38.3m.
And along with full-year results this week, chief executive Martyn Coffey said: “The underlying drivers have remained positive in our main end markets and our sales and order intake have been strong in the first 2 months of 2018.“
If you stick to investing in companies like these which can beat inflation in the long run, you could even become a millionaire.
