Bank of America (BAC)

Bank of America building in New York Times
Sean Pavone / Shutterstock

Let’s start with a bank stock. Why? While many sectors fear rising interest rates, banks look forward to them.

Central banks hike interest rates to tame inflation.

Banks lend money at higher rates than they borrow, pocketing the difference. When interest rates increase, the spread for how much a bank earns widens.

And it just so happens that quite a few banks, such as Bank of America, have upped their payouts to shareholders this year.

In July, Bank of America boosted its quarterly dividend 17% to 21 cents per share. That gives the company an annual yield of 1.8% at the current share price.

According to the latest earnings report, the bank earned a profit of $7.7 billion in Q3, up 58% from a year ago.

Plus, Bank of America shares climbed 69% over the past year. Its peers, such as Goldman Sachs, JPMorgan Chase and Morgan Stanley — all of which have raised their dividends this year — have also enjoyed substantial rallies during this period.

But you don’t have to go all-in at once. These days, you can build a diverse portfolio of by using some of your digital nickels and dimes.

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Southern Co. (SO)

The logo for Southern Company gas and electric on an Atlanta building
JHVEPhoto / Shutterstock

Moving up the yield ladder is Southern, a gas and electric utility holding company headquartered in Atlanta. It serves close to 9 million customers.

The utility sector is known for being a defensive play — and not just against inflation. Come what may, people still need to heat their homes in the winter and turn the lights on at night.

The recession-proof nature of the business means Southern can pay reliable dividends.

In April, the company boosted its quarterly payout by 2 cents per share to 66 cents per share, marking the 20th consecutive year that Southern has increased its dividend.

Look further back, and you’ll see that the company has paid steady or increasing dividends since 1948.

In the first nine months of 2021, Southern earned an adjusted profit of $3.05 per share, up 9.7% year-over-year. Management expects full-year adjusted earnings per share to be above the top end of their previous guidance range of $3.25 to $3.35.

Trading at $62 apiece, Southern stock offers a generous annual yield of 4.3%.

Global Partners (GLP)

2 gas station pumps
satephoto / Shutterstock

If you really want oversized yields, you may have to look at the lesser-known stocks — like Global Partners.

Structured as a master limited partnership, Global Partners is one of the largest independent owners, suppliers and operators of gas stations and convenience stores in the Northeast.

At the same time, it is a leading wholesale distributor of fuel products and is involved in transporting petroleum products and renewable fuels by rail from the mid-continental U.S. and Canada.

The business pays quarterly distributions of 57.5 cents per unit, which comes out to a staggering annual yield of 10.2%.

In the trailing 12 months as of Sept. 30, Global Partners’ distributable cash flow covered its payout 1.1 times after factoring in distributions to its preferred unitholders.

To be sure, dividends from ultra-high yielding energy stocks usually aren’t carved in stone. If you are on the fence about jumping into the sector, some apps might give you a free share of an energy stock just for signing up.

While commercial real estate to has always been reserved for a few elite investors, outperforming the S&P 500 over a 25-year period, First National Realty Partners allows you to access institutional-quality commercial real estate investments — without the leg work of finding deals yourself.

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Dividend yield vs. crop yield?

Two harvesting machines working in a field of wheat
@TrevorHolder / Twenty20

A carefully selected dividend stock portfolio can outrun inflation. But to hedge against rising prices, you don’t need to limit yourself to the stock market.

If you want an asset that has little correlation with the ups and downs of stocks, here is one to consider: U.S. farmland.

Even if we enter a period of hyperinflation, people will still need to eat.

And over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.

New platforms allow you to invest in U.S. farmland by taking a stake in a farm of your choice.

You’ll earn cash income from the leasing fees and crop sales. And of course, you’ll benefit from any long-term appreciation on top of that.

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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