2 inflation-beating stocks paying 8.6% a year on average!

There are plenty of stocks paying a hefty dividend this year as the inflation rate tops 7%. These two inflation-beating stocks pay 9.4% and 7.9% yields, respectively.

| 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.

With inflation hitting 7% in March, its seemed like a good idea to look at inflation-beating stocks that can help my portfolio generate income. Today I’m looking at Rio Tinto (LSE:RIO) and Phoenix Group (LSE:PHNX). If I buy into these companies today, I can expect an annual yield of 9.4% and 7.9%, respectively. This is certainly in excess of current and probably future inflation levels in the UK. But are these two stocks worth adding to my portfolio?

Rio Tinto

Rio Tinto has operations in the exploration, mining, and processing of mineral resources worldwide. The company has a broad portfolio of mining operations. Among others, it mines and processes aluminium, copper, iron ore, and minerals such as titanium dioxide, diamonds, and borates.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

This FTSE 100 mining giant has gone from strength to strength this year on the back of soaring commodity prices. Despite the considerable rise in the Rio Tinto share price, if I were to buy in today, I could still expect a 9.4% dividend yield. That’s one of the biggest yields on the FTSE 100, surpassed only by housebuilder Persimmon.

In fact, according to broker AJ Bell, Rio Tinto is expected to be the index’s single biggest dividend payer in 2022, paying out £7.4bn. While Persimmon will be the highest-yielding stock at 11.2%. AJ Bell said it expected the average dividend yield to be around 4.1% in 2022.

Rio Tinto’s strong dividend yield is backed up by impressive performance data. In 2021, the firm reported underlying earnings of $21.4bn. The figure is $8.9bn higher than in 2020.

In 2021, the London-headquartered firm had a dividend coverage ratio of 1.67. This certainly could be healthier, but I still think this stock is a good pick for my portfolio.

Phoenix Group

Life insurance specialist Phoenix Group owns household names like Standard Life and ReAssure. The former was bought from Abrdn last year.

If I were to buy in now, I could expect a dividend yield of 7.9%. Once again, that’s one of the highest on the index. What’s more, the payments are unlikely to decrease any time soon as the dividend was only upped in March. The blue-chip insurer said that it had decided to increase its dividend after annual cash generation exceeded expectations.

The group said cash generation for the year to 31 December 2021 was £1.72bn, marginally higher than 2020’s £1.71bn. The 2022 figure was well above internal targets of between £1.5bn and £1.6bn.

The company buys up legacy life insurance and pension funds that are closed to new business and manages them. Acquisitions allow the firm to grow, while stripping costs of newly acquired businesses have kept them lean. It might not be a high-growth stock but it’s a dividend machine that can help my portfolio negate the impact of inflation. Regulatory changes could also impact future operations, but, for me, this risk is worth the 7.9% dividend yield.

Despite the record year, Phoenix Group is trading at a 15% discount versus this time last year. I’m looking to add this stock to my portfolio soon.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

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

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »