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Dividend Stocks Are a Great Inflation Hedge

All good things must come to an end. In this case, we’re talking about low inflation. For what seems like a decade, the invisible hand of rising prices has been pretty subdued. A couple of energy price crashes, advances in technology, and a relatively slow, but stable, economic environment have created a ‘Goldilocks’ scenario for consumers and businesses. Prices have been rising, but the rate has been one of the lowest in history.

However, that Goldilocks scenario may finally be ending.

While the odds of hyper-inflation are roughly zilch, a return to normal seems to be on the horizon. Thanks to massive stimulus, a rebound from the depths of the coronavirus pandemic, and a return to global growth has started to push measures of inflation higher. With the Fed pledging to let inflation run a tad higher than normal to focus on its other mandates, we could all be seeing higher prices in the future.

But there is a tried-and-true hedge when it comes to our income and portfolios. Dividend stocks—especially dividend growth stocks—have long been a top way for investors to beat inflation and keep it at bay. For investors, the time to consider dividend growth stocks could be now.

Learn about Treasury Inflation Protected Securities (TIPS) here.

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