During the recent economic crisis, the central banks around the world chose to lower interest rates and inject money into the financial system. This created the potential for an inflationary nightmare -- a situation where a larger amount of money chases the same number of goods, creating price increases that erode the value of money.
The worst-case scenario? If inflation starts accelerating, investors could be faced with a situation where guaranteed investments, like savings accounts or government bonds, will offer interest rates that are lower than the rate of inflation.
In other words, if interest rates don't keep pace with inflation, savers will start losing money -- the interest that they earn on their investments will not be enough to compensate for the rising prices of everyday goods like food and gas.
But an equity investor can invest in companies that offer dividend growth rates that outpace inflation.
That's why we wanted to find companies with a long track record of boosting dividend payments. In addition, all of these companies have significant current assets to current liabilities -- meaning that they are liquid enough to cover their ongoing expenses (which increases the stability of the dividend).
To further refine the quality of the list, we collected data on institutional money flows, and identified dividend growth stocks that have seen significant institutional buying during the current quarter.
Big money managers seem to think these companies will continue to boost their dividend payments. What do you think? Use this list as a starting point for your own analysis.
List sorted by relative size of institutional buying.
1. Rock-Tenn Company
4. Cooper Industries
5. Novo Nordisk
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen does not own any of the shares mentioned above.
The Motley Fool owns shares of Rock-Tenn and Ensco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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