3 High-Yielders To Combat Rising Inflation: Centrica PLC, National Grid plc And J Sainsbury plc

With inflation rising in June, Centrica PLC (LON: CNA), National Grid plc (LON: NG) and J Sainsbury plc (LON: SBRY) could be in-demand

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Despite mountains of quantitative easing and interest rates being at historic lows, the level of inflation fell to just 1.5% earlier this year. However, this week highlighted that a rate of inflation above the target rate of 2% is a distinct possibility as the rate of increase in the consumer price index rose to 1.9% in June. This, plus the fact that interest rates look set to remain below the 4-5% ‘normal’ level for a good few years, means that high-yielding stocks such as Centrica (LSE: CNA) , National Grid (LSE: NG) and J Sainsbury (LSE: SBRY) could be in demand. Here’s why.

Centrica

Political risk still remains for Centrica and is likely to make more of an impact on the company’s share price as we get closer to the general election in 2015. However, this could be viewed as a positive for long-term investors, as it affords them the opportunity to buy shares in a diversified company that offers a yield of 5.7%. This is among the highest yields on the FTSE 100 and, crucially, is three times the current rate of inflation. Certainly, shares look set to remain volatile but, with exploration accounting for one-third of Centrica’s business interests, the company could still be a strong performer in the long run.

National Grid

Political risk is not a major problem at National Grid, with the cost of updating the UK’s infrastructure being the major concern for investors right now. While National Grid does have strong cash flow and has lower balance sheet risk after a successful rights issue in 2010, the cost of replacing infrastructure that in many cases is over 50 years old is an expensive task. Therefore, further rights issues as well as a sale of US assets have been mooted in the past, with the company maintaining that dividends will not be cut. Although shares in the company have risen by 8% this year, they still yield an impressive 5.1%.

J Sainsbury

Despite being in the midst of one of the most challenging periods in living memory for UK supermarkets, J Sainsbury continues to be a strong contender for income-seeking investors. That’s because it yields 5.1% and, furthermore, dividends are comfortably covered by earnings since the company has a payout ratio of just 56%.

Certainly, J Sainsbury may fail to deliver bottom-line growth over the next couple of years, as the UK supermarket sector become increasingly competitive. However, the company could have pulled off a masterstroke by splitting its offering between a joint venture with Netto and the traditional, higher quality J Sainsbury offering. Doing so may allow it compete on two fronts and avoid the squeezed middle that it has been pulled into via price wars from competitors such as Tesco. Therefore, J Sainsbury could return to growth faster than its peers and, in the meantime, offers an inflation-busting yield, too.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares in J Sainsbury, Tesco, Centrica and National Grid.

More on Investing Articles

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »