Inflation throughout the world is currently soaring. This means that the value of my money is effectively dwindling. I’m on the lookout for UK shares to boost my holdings that pay a dividend and can make me a passive income to beat inflation!
Dividend investing
I work hard to save money but when inflation is rising, these savings are losing value while sitting in my bank. There aren’t many financial products that can offer me a return of over 5%, which is currently the inflation level in the UK.
Dividend investing is a popular method many investors use to make their cash work for them and make them a passive income. This involves identifying the best UK shares that pay a consistent dividend. I do understand dividends can be cancelled, however. I have my own method of dividend investing.
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Dividend investing is a long-term strategy, in my opinion, and I invest for the long term. My mantra involves finding the best firms with the potential to increase the size of their dividends over time. I find the best firms are those with a good balance between current profitability and future growth potential.
When reviewing a dividend stock for investment viability, I look at a number of factors. First, I examine fundamentals such as performance track record, balance sheet, and of course, the dividend yield as well as dividend payment record.
Finally, I always research the UK share I am interested in the current news cycle. What I mean by this is if there are current company specific or market news items that could affect any shares I am interested in. An example of this type of news could be a takeover or acquisition.
Tobacco giant
One UK share I believe could help me beat inflation is smoking giant Imperial Brands (LSE:IMB), with its juicy dividend yield of over 8%. It is worth mentioning the FTSE 100 average dividend yield is 3%-4%.
Smoking firms often have reputation issues due to the health issues caused by smoking. As a smoker myself, this particular issue does not bother me. However, ethical investing is on the rise, which could hinder the investment viability of firms like Imperial.
As I write, Imperial shares are trading for 1,732p. At this time last year, the shares were trading for 1,429p, which is a 21% return over a 12-month period. As well as the enticing dividend yield, Imperial shares look cheap with a price-to-earnings ratio of just under six.
Reviewing some of the other fundamentals, I can see Imperial has a good track record of recent and historic performance, although I understand that past performance is not a guarantee of the future. Recent full-year results posted in November were impressive. Revenue, profit, and dividend per share increased. Furthermore, Imperial decided to look at next generation tobacco alternative products. This tells me it is keeping one eye on future growth prospects. Imperial also has plenty of free cash flow, which will support dividend payments I hope to receive.
Imperial is the perfect UK share to help me beat inflation through dividend investing. It has a good track record of performance, a strong position in its market, is adapting to changing smoking habits, and has lots of cash to pay dividends. I’d add the shares to my holdings at current levels.
