With inflation moving back up to 2.9% in August, obtaining a real return may become more difficult for investors. Certainly, there are a number of popular income shares which are likely to offer income returns in excess of inflation. However, they may become more in-demand if inflation keeps rising, and this may cause their yields to compress.
One solution could be to buy cyclical stocks with above-inflation dividend yields. They may lack the track record of dividend stability of more obvious choices, and their financial performance may not be as robust or predictable as defensive income stocks found in sectors such as utilities and tobacco. However, they may provide a real income return as well as capital growth in the long run.
by Nick Sudbury| Funds|2 mins. to read Commodity-related stocks have had a difficult time of it in recent years with the main sector indices still trading well below their pre financial crisis levels. Funds that specialise in this area can provide a useful source of diversification and protection against inflation.
by John Kingham| Equities|2 mins. to read As dividend stocks go, life insurance companies have a mixed track record. On the one hand, they operate in a sector which is relatively immune to the economic cycle (people don't typically cancel their life insurance just because there's a recession).
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