KEY POINTS

  • When people stay at home, they are more willing to maintain and upgrade their dwellings.
  • Building analog electronics utilized in a wide range of modern devices can make a lot of money.
  • Getting paid to watch paint dry is pretty exciting.

A key benefit to investing is the potential for your stocks to raise their dividends quicker than inflation rises. But as we saw in 2020, markets don’t always go up. Fortunately, there’s one type of investment income that doesn’t fluctuate as much with market changes: dividends. Dividends are cash payments made by a company to its shareholders regularly.

Companies often pay dividends from their operating earnings. That means they can grow even if the stock price is decreasing. That makes it easier to weather tough times and wait for a recovery. And when dividend increases keep pace with inflation, investors’ purchasing power gets a boost too.

We selected three companies below that not only have the ability to increase their dividends but have done so at a rate fast enough to keep up with inflation. Read on to discover why Home Depot (NYSE:HD)Texas Instruments (NASDAQ:TXN), and Sherwin-Williams (NYSE:SHW) deserve a spot in your portfolio.

Home Depot offers a steady dividend

The coronavirus pandemic has resulted in inflation, meaning that the purchasing power of investors’ dollars has decreased as the cost of goods has increased. One way to safeguard said purchasing power is by investing in dividend stocks whose payouts rise faster than the inflation rate.

If you’re an investor searching for a company that offers dividends, look no further than Home Depot. The home improvement retailer has boosted its dividend per share almost six times over, from $1.16 in 2013 to a whopping $6.60 in just nine years! Inflation might have risen alarmingly in the last year, but it doesn’t even compare with Home Depot’s rapid dividend growth.

Home Depot’s success is, of course, attributable to its profits. If it weren’t for these margins backing it up, the company would have gone through all of its cash and taken on debt long ago. Instead, Home Depot’s earnings per share have increased exponentially in recent years, going from $3 to $15.53. For investors, this indicates robust growth and sustainability moving forward.

Texas Instruments is a specialist.

Texas Instruments is one stock that’s a great play on both its solid fundamentals and increasing dividend. The company makes analog chips, which may not be as cutting-edge and exciting as the latest processor in your car or mining cryptocurrency. However, these chips are essential for many current and recent technologies.

Uncool as it may be, Texas Instruments’ long-standing presence in the chip industry puts it ahead of competitors still trying to break into this ever-growing market. As a result, TI’s revenue saw nearly 30% growth year over year in 2021 (totaling more than $18 billion), and its net income increased by an impressive 40% (to $7.7 billion).

Despite seemingly solid growth, shortages of electronic components continue to hinder businesses throughout the tech industry. Someone forgot to tell Texas Instruments, though; double-digit increases still marked its second-quarter results. Revenue rose 14%, while net profit increased 19% in the second quarter of 2022.

Highly lucrative corporations also tend to be strong cash generators, and Texas Instruments is no exception. Its free cash flow (FCF) is around 30% of its revenue. That leaves the firm with a lot of financial firepower to pay out a quarterly dividend on schedule and steadily raise it yearly. And the business has a good track record in providing those boosts: From 2017 to 2021, the dividend increased by more than twofold each year. Recently, the organization boosted its payout by an impressive 8%.

As automation progresses, companies like Texas Instruments will be there to capitalize. As a result, this stock is a great way to beat inflation and weather any potential economic storms.

Sherwin-Williams has green

Sherwin-Williams is a paint company based in the United States. For 43 years, it has increased its dividend annually. That’s a fantastic track record for any firm to have. But, it becomes even more remarkable when you consider that it accomplished so while dealing with issues like the housing market’s health.

Sherwin-Williams has grown its dividend for decades, and the company’s 2022 increase was nearly 9.1%, which outpaces the current reported 8.3% annualized inflation rate. Moreover, it accomplished that growth while only paying out around 35% of its earnings, suggesting it may have more room to rise if it decides to.

While there are no guarantees with investments, a company’s ability to regularly reward investors is telling. In the case of Sherwin-Williams, this dividend commitment and story demonstrates a reasonable economic moat that will enable such payouts to last.

A large part of Sherwin-Williams’ competitive advantage comes from the high quality of its paints. As a result, its products often appear on “best of” lists, increasing prices. Additionally, Sherwin-Williams operates its own stores, so it can sell a complete range of its products and make a profit no matter what price customers choose.

The store can quickly adapt to customer demand by being able to mix paint colors. This helps the company be more profitable than those who produce final products well ahead when needed. The flexibility also reflects the company’s history of giving shareholders regular payouts.

Waiting pays off

It’s never a pleasant sight to see your investment account balance decrease. However, a dividend stock can provide you money to reinvest without forcing you to sell your existing stock, which helps alleviate the pain of seeing your investment account balance drop. In addition, when that dividend rises, it serves as a reminder that there is a company behind the stock, and the business may still be doing well.

If you’re looking for solid raise their dividends quicker than inflation, consider Home Depot, Texas Instruments, or Sherwin-Williams. Remember that to receive their dividends, and you’ll need to own the stock before its ex-dividend date and hold onto it until at least that date. So get started building your rising investment income stream.

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