2 income shares I’d buy to protect me from inflation

Inflation is on the rise around the world. Dylan Hood takes a look at two income shares that he thinks could protect his portfolio from this threat.

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UK inflation reached 7.8% in April, the highest since records began in 1989. Across the pond, the situation is bad too, with the US consumer price index reaching 8.6%. So, with cash depreciating in value, I’m on the lookout for some high-yield income shares to protect my portfolio.

Nothing’s guaranteed, of course, but here are two-income shares I’d buy for my portfolio today.  

Royal Mail

Royal Mail (LSE: RMG) is a FTSE 100 stalwart. I like the look of this stock for my portfolio due to its strong industry presence and healthy 6.2% dividend. The Royal Mail share price has been struggling recently, down 46% year-to-date and 52% over the past 12 months. However, I still think there’s value here.

Royal Mail has seen its revenues increase by around 40% over the last five years. In addition to this, earnings per share (EPS) climbed from 27p in 2017 to 84p in its most recent results. These metrics give me confidence as a potential investor.

In addition to this, at the current price, the shares trade on a price-to-earnings (P/E) ratio of just 4.5. For context, P/E ratios of 10 and under are considered good value.

That being said, the near £2bn debt on the Royal Mail balance sheet does concern me. This figure has tripled over the last five years, which isn’t a good sign. With the Bank of England raising interest rates, this debt pile could get bigger in the near future.

However, the high yield, low valuation, and consistent growth outweigh this risk, in my opinion. Therefore, I’d buy Royal Mail shares for my portfolio today.


M&G (LSE: MNG) is a global investment manager based in the UK. It currently offers a juicy 8.7% dividend yield, outpacing the current UK inflation rate to protect my portfolio. The shares have performed well over the past six months, rising over 9%. That being said, they’re down 14% over the last 12 months.

M&G’s FY2021 results were encouraging, highlighting that shareholder cost savings targets and demerger commitments had been achieved well ahead of targets. Total assets under management also increased 0.8% year on year, which is a good sign of growth, albeit not huge growth.

However, profits fell by £67m year-on-year, which is a worry. I think this reflects a wider risk that M&G will have to face in the near future – those rising interest rates. As rates increase, investment tends to decline, which is bad news for a global investment manager. This could pose a risk throughout 2022 and beyond, constraining the M&G share price.

That being said, I think that the high dividend and strong post-merger results give the firm a strong investment case. As such, I’d buy this stock for my portfolio.

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.

Dylan Hood 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.

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