tk77mann

Creating an Inflation-Proof Source of Income in Retirement

I am also a dividend stock investor and really like the way they combat inflation for us. I also look at the free cash flows of the companies I am looking at investing in. If their free cash flows do not cover their dividends, I look at their earnings growth and additional financing much more carefully.

Some companies, such as many utilities including ED, do not cover their dividends with their cash flows. They continue to borrow money and sell more shares to pay for capital spending. Their earnings are not often growing fast enough to cover the additional borrowing and dividend expenses, so eventually they either have to raise their prices (difficult politically and economically to do) and / or slash their dividends. When the dividends get cut, so do their stock prices, and we do not want to be on that ride when those wheels fall off.

Many stock analyses do not look at free cash flows and I think they leave out a serious piece of the investment data by doing so.

Four Oil Giants to Keep an Eye on - Barron's

Donzelion,

Don't forget oil is priced in dollars, not pounds, so even if the pound crashes BP's earnings and dividends will be issued in dollars. This will be a good thing for UK investors of BP shares.

The major oil companies are a good hedge against the looming inflation we are facing with the huge monetary influx being spent to prop up the economy, IMO.