Jonathan Christopher

Must-Know Criteria for Picking Inflation Proof, High Dividend Stocks

I believe we face two very different scenarios with respect to inflation. One scenario, favored by the Gold Bugs, is that the huge number of paper dollars being created by government will inevitable lead to huge inflation numbers. I believe there is a very large probability this will occur.

The sceond scenario is that one of the major effects of the especially severe recession we are experiencing will change the psychology of consumers. That as a result of the difficulties they have seen, affecting themselves and their parents, they will become more conservative savers. This second scenario is the Japan scenario. Though the Japanese National Debt is much larger as a percentage of GDP than the US, their inflation rate is very low, due to high saving rates. The savings absorb the large amount of Yen debt created b the government.

Both scenarios are possible, and any strategy you adopt should attempt to include both possible events.

My preferred strategy is to purchase very low PE securities with high yields, and staying power in their business. It may seem counter intuitive, but these include preferred stocks in REITS (AHT-PD), Low PE Royalty Trusts (PVX), and strong companies with financial operations ( NLY, ACAS, AGNC). I also have some very speculative stocks (ENT, HUN, HTE) which are selling well below book, but are cash-flow positive. I am long on all mentioned stocks.