It’s no secret that inflation has been wreaking havoc across markets this year. With stagnant cash depreciating, I’m on the lookout for top dividend stocks that can go some way towards hedging me against rising rates. Here are two I’m strongly considering today.
Red hot rates
Before we delve into my picks, let’s start by taking a closer look at what’s been going on so far in 2022.
In the UK, inflation continues to reach new highs and July saw it in double-digits at 10.1%. In its latest update, the Bank of England explained that rates could peak at 13% this year. And more recently, investment bank Citi made the bold prediction inflation could rise to as high as 18% next year. Or as it stated, “entering the stratosphere”.
Citi pinned its forecast largely to gas prices as it revealed the UK’s energy price cap could reach nearly £6,000 come April 2023.
With this, I’m looking to put my money to work. And my first pick would be homebuilder Taylor Wimpey (LSE: TW). Looking at its share price over the last 12 months isn’t a pretty read as the stock has seen 37% shaved off its price.
However, with this fall comes a meaty 8% dividend yield. This isn’t inflation-beating, but this passive income stream could certainly come in handy in the months ahead.
Despite tough economic conditions, the firm recently released a strong set of half-year results. On the back of a strong set of comparators, it managed to slightly grow its operating profit. And for its full-year outlook, it expects operating profits to be at the “top end of the current market consensus range”.
The biggest issues the company faces are rising material costs and potential supply chain issues. But with these only as short-term concerns, I’d consider buying the stock today.
My second pick would be global investment company Abrdn (LSE: ABDN). Like Taylor Wimpey, the stock’s price has suffered so far in 2022. Over the last year, the Abrdn share price has slid nearly 44%.
It currently offers a whopping 9.8% dividend yield, which is incredibly attractive. And on top of this, it also looks cheap with a price-to-earnings ratio of 5.4.
Despite some subpar figures being reported in its latest update, I still see plenty of positives with Abrdn.
Firstly, it recently completed the initial phase of a £300m shareholder return programme via a £150m share buyback scheme. Its interim dividend of 7.3p is also in line with its dividend policy.
The firm also finds itself in a “strong capital position”, with £600m in regulatory surplus.
Its biggest challenge will be cash-strapped consumers shying away from making investments as further economic troubles loom. And this was highlighted through the dip in fee-based revenue.
Yet despite this, I’d still buy today. Its monumental dividend yield is a major pull for me. And I see real long-term opportunity in a strong FTSE 100 brand that’s taken a beating in recent times.