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We are paying a heavy price for inflation.
Every bill, every outing, every "is this amount okay?" at checkout is another slap in the face. On average, we are paying 9% more for everything we need to survive, and it is cutting deep. Clothes cost 5% more than they did last year. Grocery bills are now 10% higher. The cost of vehicle maintenance is up 14%. And most jarringly, gas prices are 60% higher.
And if you compare costs to wages, it's not looking good for anyone outside of the upper echelons of American society. Even for the lucky few that reaped the benefits of wage inflation in 2020 and early 2021, those wages may not be enough without additional support. Wages haven't kept pace with the CPI for over a year.
But there's good news: even though inflation is beating down our incomes, we can make back the money lost with a few deft investments.
Stock investing isn't all about buying low and selling high for a profit - although that is the foundation of all good investing. In times like these, it's important to seek out passive income to supplement what is already under so much strain. The key to securing financial stability in a rocky market is to seek out quality companies with strong financials that will pay you to own their stock.
Dividends, as they are known in the investing world, are often looked down on or ignored. Not every company offers a dividend, but when they do, it's usually a pittance. The average payout - at least for companies on the S&P 500 index - is between 2%- 5% of the company's share price ... pennies on the dollar.
But through my research, I have found stocks and ETFs that offer double that - each offering around 10%.
Don't settle for the bare minimum. Buy these three companies instead and bolster your income.
Pick #1: Dorchester Minerals LP (NASDAQ: DMLP)
Don't let the name fool you, this isn't a mining company. DMLP specializes in oil and gas land royalties, meaning that it owns fossil fuel interests in 574 countries and 25 states that it leases to interested drilling companies. In some ways, you could think of it as an energy landlord.
With demand for fuel as high as ever and no appropriate infrastructure to meet it, this company is in a good position to profit as oil and gas producers expand drilling operations in the Bakken and Permian basins.
DMLP already has a dramatic profit margin. With $116 million in revenue and $94 million in profits in the trailing 12 months, this company has scored an 81% profit margin. That is almost unheard of. With that much money heading to the bank, this company has $88 million in cash - more than enough money on hand to deal with its debts (a mere $2 million) and plenty to distribute to its shareholders.
At the time of writing, Dorchester Minerals L P has an 11.68% dividend yield. I'd strongly consider buying in now to start reaping the benefits of passive income.
Pick #2: Arbor Realty Trust Inc. (NYSE: ABR)
This company is a nationwide REIT (real estate investment trust) headquartered in Uniondale, New York. It was founded 25 years ago to provide loan origination and to service multifamily and single-family rentals, senior housing, and other diverse commercial real estate assets.
As much as the housing market appears... not good, to put it lightly - some are declaring the housing market slow down to be a recession in and of itself. However, this is still a sector we want to invest in long term - especially when it's a quality company like this offering a 10.99% dividend yield.
Short-term demand may be languishing, but we are seeing a surge in long-term demand among m illennials looking to buy their first homes and raise families - a massive tailwind for REITs and construction companies.
If you're at all interested in passive income and the homebuilding industry, I'd consider buying this stock.
Pick #3: VanEck BDC Income ETF (NYSEArca: BIZD)
Business development companies (BDCs) are a little-known way individual investors can lend to midsize companies that are too small for traditional bond offerings.
Why would you want to do that? Because these companies pay higher yields to borrow than bond-market giants and they must pay 90% of their net income as dividends to get preferential tax treatment. The average dividend yield of a BDC is 9%.
But I can't recommend you go out and buy every BDC on the market. Each BDC management team tends to have their own investing philosophy, meaning that each will also have varying credit risk and exposure to business disruptions. To ensure you're buying the best of the best, you would have to do a lot of your own research into the team, their portfolio, and those individual businesses - hence why many investors don't know about BDCs. It can be too much homework to be worthwhile.
Anyone looking for exposure to this space and the passive income it offers investor, however, can turn to an ETF that does research for them - like BIZD.
BIZD offers access to a diversified portfolio of publicly traded U.S. BDCs. It offers a dividend yield of 9.71% annually to shareholders, and I'd consider buying it if I were you.
Dividend investing is definitely one of the most reliable ways to get through this tough time. But for those who've already taken a bunch of losses this year, you may need to rebuild your portfolio in record time.
I've got three trades right now that are perfect for this bear market. They're my version of fire insurance - the best cheap trades I can find right now with the best potential for safe returns.
And you can get them all for just $5, plus complimentary, full access membership to my research service for one month.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.