3 inflation-busting dividend stocks that yield up to 9% (2024)

This Fool explains why he would acquire these inflation-busting dividend stocks for his portfolio today to counter low interest rates.

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Even though the Bank of England has started to increase interest rates, the base rate of 0.5% is still far below the inflation rate. Analysts expect inflation to touch nearly 7% this year as the costs of goods and services rise.

bAs such, I have been searching for inflation-busting dividend stocks to add to my portfolio. Here are three income stocks I would buy today, all of which yield between 7% and 9%.

Leading dividend stocks

Topping my list with the lowest dividend yield in the pack is the financial services firm Chesnara (LSE: CSN). This company manages books of life and pension policies, a relatively niche and specialist business model.

The nature of the business means the enterprise has to take a long-term perspective when planning for investments. This approach has benefits and drawbacks.

On the positive side, the company has a relatively high level of confidence in its income projections for the foreseeable future. Cash flows from pension and life policies are somewhat predictable.

On the other side of the equation, it has to be conservative when managing payouts to investors. The company cannot distribute too much money, or it may breach its regulatory requirements.

At the time of writing, the stock supports a dividend yield of 7.7%. While the distribution is by no means guaranteed indefinitely, I think it looks desirable in the current interest rate environment.

Market growth

Over the past couple of years, the wealth of the most affluent section of society has increased significantly. This suggests demand for wealth managers such as M&G (LSE: MNG) could increase as we advance.

As one of the best-known wealth managers in Europe, the company has a solid competitive advantage. It is also boosting its footprint by acquiring smaller peers and is expanding into different sections of the market. Offering consumers various alternatives to the traditional wealth management service is another growth avenue the group is pursuing.

One of the main challenges the business will face going forward is competition. It is not the only company in the space. Other wealth managers are also trying to expand their footprint and acquire more customers.

Despite this headwind, I would buy the company with its 8.4% yield for my portfolio of dividend stocks.

Inflation-busting income

The final company I would buy for my portfolio of dividend stocks is the housebuilder Persimmon (LSE: PSN).

Shares in this firm currently offer a dividend yield of 9.7%, at the time of writing. The yield has shot up after the government announced it would be seeking to recoup billions from developers to help deal with the cladding crisis.

The financial fallout from this is possibly the most prominent risk hanging over the stock today.

However, there is also a significant tailwind driving the company forward. That is the structurally undersupplied UK housing market.

It seems likely that demand will continue to outpace supply in the housing market for the next three to five years, at least, suggesting Persimmon should be able to continue to find buyers for its new properties for the foreseeable future.

With this tailwind, I think its dividend is here to stay.