Three Stocks Raising Dividends at 4x the Rate of Inflation

After surging as high as 9.2% in 2022, inflation is back down to 2.5% year-over-year, according to the Labor Department. But polls show inflation is still the top economic concern for Americans.

It's easy to see why—with groceries costing 21% more than they did four years ago, it can easily cancel out any pay raises many workers have gained in the meantime.

But there's a simple way to beat inflation over time: By buying shares of companies whose dividends are growing much faster than inflation.

Do this, and you can lock down a consistently growing income stream that keeps you a few steps ahead of rising prices.

Here are three companies with a history and proven ability of raising dividends at least four times faster than today's rate of inflation.

Inflation Hedge #1: The Hershey Company (HSY)

The Hershey Company (HSY), the $40 billion candy company headquartered in Hershey, Pennsylvania, has raised its dividend at least once a year for decades now, with one exception in 2008 when it held its payouts steady.

Over the last five years, Hershey has nearly doubled its payouts, from $0.77/share each quarter in 2019 to $1.37/share each quarter in 2023.

That averages out to an annual growth rate of 12.2%. For context, that means Hershey has grown its dividend nearly 5x times faster than today's rate of inflation over the last five years.

And Hershey's dividend growth looks well-positioned to continue. The company pays just 56.7% of profits back to investors in dividends—meaning that it could almost double its payouts overnight without growing earnings at all.

The company pays a dividend of 2.7%, which is more than double the 1.19% yield of the average S&P 500 company.

Inflation Hedge No. 2: UnitedHealth Group (UNH)

UnitedHealth Group (UNH) is a $548 billion health insurer headquartered in Minnetonka, Minnesota.

Over the last five years, UNH has increased its dividend from $1.08/share each quarter to $2.10/share each quarter—amounting to an average annual increase of 14.2%.

In other words, UNH is growing its quarterly payouts over 5x faster than today's rate of inflation. And the company's financials suggest this growth could continue in the years ahead.

Last quarter, UNH grew revenues by 6.4% on a year-over-year basis, while paying out just 51.4% of its net income back to investors as dividends. This means that, like Hershey, UNH could almost double its dividend overnight without going into debt.

As of this writing, UNH's dividend of 1.45% is somewhat higher than the S&P 500's average yield of just 1.19%.

Inflation Hedge No. 3: Domino's Pizza Inc. (DPZ)

Since 2019, Domino's Pizza Inc. (DPZ) has increased its quarterly dividend payouts from $0.65/share to $1.51/share.

That's a nearly 200% increase, or an average annual dividend hike of 18.3% a year for the last five years. That's over 6x today's rate of inflation.

Strikingly, Domino's pays out just 33% of its net income back to shareholders as a dividend—meaning it's even better positioned than UnitedHealth or Hershey to grow its dividend dramatically without growing earnings by one dime.

But in any case, Domino's grew earnings last quarter by 21.5% on a year-over-year basis. That's robust earnings growth, and a sign that the company's aggressive dividend growth could continue.

Today, DPZ pays a dividend yield of 1.49% that is well above the 1.19% yield paid by the average S&P 500 company.

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