Dividend Stocks Attract Inflation-Wary Investors

Investors wary of inflation should be aiming for high-dividend paying equities to offset inflation due to possible rises in stock prices, a global investment house has said. Unlike investments in bonds where inflation ate away at the real value of the fixed coupon payments and the real value of the bond, stocks that paid dividends could offset inflation due to possible rising stock prices, Fidelity Worldwide Investment global chief investment officer Dominic Rossi said.

"Inflation can allow many companies with pricing power in the supply of commodities or even manufactured products to enjoy disproportionate increases in profits that are reflected in their stock prices," Rossi said. "History shows that high dividend stocks tend to outperform other assets in periods of sluggish economic growth - which is exactly what we face now." In a low-yield, low-growth world, Rossi said investors should favor dividend-paying stocks and strategies, with income likely to account for a much more significant part of equity total returns.

Source: Investor Daily

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