Many investors are experiencing inflation like they've never seen before. The Consumer Price Index increased 8.3% in April with food prices soaring 10.8%, the biggest spike since November 1980. It's a devastating hit to those with the lowest incomes, a hidden tax on those who can least afford it -- and with no end in sight.

While rampant inflation exacts a tragic human toll, it has also been unrelenting in its impact on Wall Street with the S&P 500 poised to dip into bear market territory and possibly trigger a recession. Tech stocks are already deep into a steep correction.

Tattooed woman flexing bicep.

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Investors are afraid for what is to come, and while it's understandable for them to worry, history shows these are the times when they should control that emotion most because bear markets are always buying opportunities. So long as investors buy good businesses and have an appropriate investment horizon to give their stocks' buy theses time to play out, there is no reason they can't make money. 

One of the best places investors can put their money is in dividend-paying stocks, which have generated positive returns in all rolling 10-year periods going back to 1930, according to the asset managers at Hartford Funds.

Even when the broad market index was losing money, such as in the "lost decade" of the 2000s when the S&P 500 generated negative returns, dividend stocks still posted 1.8% gains. With that in mind, the following pair of stocks would be perfect to add to your portfolio during an inflation-induced bear market.

Couple holding keys to new car.

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Genuine Parts

Auto parts retailer Genuine Parts (GPC -2.38%) is primed to capitalize on a severe market downturn because buying a new car is an expensive proposition that becomes doubly so during inflationary periods. Couple that with the current supply-chain problems that make it difficult for auto manufacturers to obtain critical parts -- many carmakers are shipping cars without non-safety-related computer chips with a promise to add them later -- and car owners are holding on to their cars longer. 

Moreover, the parts shortage has led demand for used cars to rise, pushing their prices to new highs and making your old rattletrap a more attractive option. Genuine Parts, which owns the NAPA Auto Parts brand of retail stores, benefits from these conditions.

Last month it reported record sales of $5.3 billion, up 19% year over year, with adjusted profits soaring 24%, and it upgraded its outlook for both sales and earnings for the full year. With over 60% of revenue coming from auto parts sales, Genuine Parts is perfectly positioned to continue growing in the future.

The auto parts retailer has paid a cash dividend every year since going public in 1948, and earlier this year it raised that payout to $0.895 per share, marking the 66th consecutive year Genuine Parts has increased the dividend payment. This long history of increases makes it a Dividend King

Hershey Kiss bites.

Image source: Hershey.


There's a fun economic indicator called the Lipstick Effect, whereby affordable luxury stocks do better than you might expect in times of trouble because consumers unable to buy truly upscale products instead purchase smaller indulgences. It was coined by Leonard Lauder of Estée Lauder to explain why some companies like premium lipstick companies continued to do well during the market collapse precipitated by the dot-com bubble and 9/11.

There are any number of everyday luxuries we could point to, but Hershey (HSY 0.31%) is one that should do well in today's market environment. Chocolate is one of those impulse treats consumers still flock to despite an overall, health-oriented trend. The National Confectioners Association says chocolate accounted for 57% of the total $37 billion in confectionery sales last year, up 9% from 2020, and it's still seen as an affordable luxury today.

Hershey saw a 16% jump in first-quarter sales and a 32% jump in adjusted profits. Despite the inflationary environment, the chocolate company also raised its outlook for the year. It's expanded into non-chocolate snacks over the years, most recently acquiring two pretzel companies as well as Lily's Sweets, a maker of health and wellness products. 

The confection giant has also paid dividends for over 92 years -- since 1930 -- and has steadily increased them for the past dozen years or so. With a payout ratio of 46%, the dividend of this food stock is both safe and able to continue going up for at least another dozen years.