3 secret inflation-busting dividend stocks to buy for passive income

Paul Summers picks out three under-the-radar dividend stocks he’d consider buying as a way of fighting inflation.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Dividend stocks can be a great source of passive income. They can also be used as a way of taking on the battle against inflation.

Many investors will be drawn to the ‘usual suspects’ for their dividend fix, namely FTSE 100 companies. However, I think looking further down the market spectrum can also be a good idea. Here are three less-well-known shares I’d be prepared to buy today.

Liontrust Asset Management

Like many other listed companies, fund manager Liontrust (LSE: LIO) hasn’t had the greatest of starts to 2022. Actually, that’s an understatement. Its share price has now tumbled 24% year-to-date, most likely due to concerns that profits will fall due to people pulling their money out of the market. 

That’s said, it’s still up 34% over the last 12 months. And, of course, the beauty of investing for dividends is that I can take such volatility in my stride so long as the passive income keeps rolling in. 

Importantly, Liontrust has consistently hiked its annual payout by a double-digit percentage for many years. Analysts have the company returning 64.1p per share in the current financial year. At today’s share price, that equates to a yield of 4%. It’s also sufficiently covered by profits, making a cut unlikely.

That said, investors need to be aware that the fund management industry is notoriously competitive and there’s always a risk Liontrust may need to cut fees to help retain clients.

Redde Northgate

Redde Northgate (LSE: REDD) provides “mobility solutions and automotive solutions” to businesses. It also strikes me as a great source of dividends.

The £1bn-cap company looks set to return 19.4p per share to holders in FY22, giving a chunky yield of 4.9%. This should help holders to keep up with rising costs. Like Liontrust, the payouts are safely covered by expected earnings. With the exception of 2020, Redde Northgate is also a regular dividend hiker. 

The shares aren’t exactly expensive either, changing hands for nine times forecast earnings. That’s despite the company’s value rising 45% over the last 12 months!

I suppose one thing to bear in mind here is that Redde Northgate may need to replenish its fleet of vehicles every now and then. That could end up reducing margins significantly, especially at today’s prices.  

Synthomer

Chemicals firm Synthomer (LSE: SYNT) is a final secret stock offering a tempting dividend yield. It’s a leading supplier of aqueous polymers that are used in things such as latex gloves.

Just like the aforementioned asset manager, Synthomer’s share price has been on a downer since the beginning of 2022. In the last 12 months, it’s fallen 22%. On a positive note, this does leave them looking cheap at just seven times expected earnings. 

Unfortunately, the dividend is expected to fall by 22% this year. However, I’m including it here for two simple reasons. First, the yield is still expected to be 5%, which is a far more passive income than I’d get from a cash savings account. Second, this payout looks thoroughly secure based on predicted profits. 

Similar to Redde Northgate, a risk with Synthomer is that supply chain hold-ups may impede growth. This may explain why the shares have been out of form recently.

Notwithstanding this, the vast majority of brokers covering the company remain positive. This suggests now might be as good a time as any for long-term investors like me to load up.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Synthomer. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Woman using laptop and working from home
Investing Articles

2 top stocks to buy with dividends yielding more than 3%

When I’m looking for stocks to buy, big dividends can be attractive. On my radar right now is a FTSE…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

2 FTSE 250 high-dividend stocks I’d buy for passive income!

Buying shares with above-average dividend yields can have a spectacular effect on long-term passive income. Here are two high-dividend stocks…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Should I buy this dirt-cheap penny stock for growth and returns?

This Fool delves deeper into a penny stock that could be primed to grow and provide lucrative returns in the…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

3 points I’ve learned from Warren Buffett’s whopping $43.8bn loss

Jon Smith shares some of his takeaways after seeing the Q2 reported loss for Warren Buffett's company, Berkshire Hathaway.

Read more »

Happy couple showing relief at news
Investing Articles

The Aviva share price is climbing. Here’s why I’d buy more

After what seems like years of going nowhere, the Aviva share price is finally showing signs of life. I take…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

This is one of the best shares to buy for juicy dividends!

Jabran Khan is hunting for the best shares to buy. This commodities business offers an enticing dividend yield to boost…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Can I trust Rio Tinto’s 10.3% dividend yield?

Rio Tinto offers one of the biggest dividend yields on the FTSE 100 today. But does this make it a…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Lithium prices skyrocket: 2 UK shares I’d buy to capitalise 

Lithium has quickly become the most in-demand metal in 2022. I am looking at two UK shares in the EV…

Read more »