Inflation will always be a factor as long as there are prices. Rising prices erode purchasing power for consumers, whose spending is the ultimate driver of our economy. Combined with the government's antidote -- raising interest rates -- this is a double whammy for many publicly traded companies.
But not all. Among the thousands of individual stocks that an investor can choose from are numerous blue chips that possess characteristics that can help thwart inflation's bite. These include pricing power, a strong position in an industry that isn't overly sensitive to economic gyrations, and a company's specific financial strengths.
Three to consider here are Prologis (PLD 0.69%), Kroger (KR -0.75%), and Dollar General (DG -0.41%). They have the inflation-resistant traits mentioned above, plus long records of solid investor returns characteristic of good dividend stocks. And they're selling at attractive prices right now.
While these all have had their dips, they have the long-term performance and market moats in essential industries to make them inflation-resistant, and they're selling now at share prices that add to their appeal as long-term investments.
This chart shows how each of these three stocks has fared since the Great Recession of 2008-2009. This 15-year period shows their issuers' resilience and ability to adapt to changing markets and opportunities. Some thoughts on each follow.
1. Dollar General
In inflationary times, value-oriented retail chains really come into their own, and Dollar General (DG -0.41%) is exhibit A. This Nashville-based operation now boasts more than 19,000 stores in the United States and Mexico.
Most of the company's merchandise sells for less than $10, with a big focus on the everyday consumables category, which includes food, paper products, and household cleaning goods. That pricing offers relief to cash-strapped consumers, and also appeals to more affluent consumers in urban settings and at locations that are often the only choice nearby, including many rural areas.
Dollar General stock is currently selling for about $159 a share and is yielding about 1.5% after seven straight years of rising dividends. The consensus target price of $200 further adds to the potential appeal and upside of this inflation-fighting investment.
2. Kroger
Kroger has grown from Barney Kroger's first grocery store in 1883 to one of the world's largest retailers, with more than 2,800 retail locations and distribution centers that will grow by another nearly 2,200 locations when the company closes on its $24.6 billion merger with Albertson's, targeted for early 2024.
That deal is facing potential challenges, but even if it were to be quashed, Kroger would remain a major player in one of the most essential industries. Everyone eats, giving this Cincinnati-based icon the benefit of relatively inelastic demand and pricing power among its vast customer base.
You can currently buy Kroger stock for about $47 a share, and analysts give it a consensus target price of $52.41. Along with that potential upside, you get 17 straight years of dividend increases, and a current yield of about 2.5%.
3. Prologis
This one is not like the other two. Prologis doesn't sell to consumers, but it does provide the logistics to get those products on store shelves and doorsteps around the world. This is the world's largest owner of such industrial real estate, with more than 1.2 billion square feet of space serving about 6,700 customers in 19 different countries.
Prologis says about $2.7 trillion in goods, representing 2.8% of the world's GDP, flows through its properties each year. The growth of e-commerce and Prologis' position as an essential link in the supply chain should help this real estate investment trust (REIT) continue to grow its portfolio and the rent for its high-demand real estate.
Prologis stock is selling for about $123 a share of late and pays a dividend yield of about 2.8% after 10 straight years of increases. Analysts give shares in this San Francisco-based operation a consensus target price of $143.48, adding to its long-term appeal.
Stability amidst economic uncertainty
The factors that make a stock inflation-resistant also can make it a good long-term buys, and that's an essential point of investing: buying great companies for the long haul. Prologis, Kroger, and Dollar General present nice opportunities to profit, and at attractive prices.
