AUS
NZ
UK
CA
USA
IND
Summary
- UK’s inflation rate hit 2.5 per cent in June, the highest in almost three years.
- Economists and experts have expressed concerns that we might be entering into a period of elevated inflation.
- Stocks like Rio Tinto, Segro Plc, among others, could be good bets against inflation.
For the month of June, UK’s inflation rate hit 2.5 per cent, the highest in almost three years due to accelerating fuel and food costs. Economists and experts have expressed concerns that we might be entering into a period of elevated inflation. High inflation rate increases commodity prices, which could negatively impact investors.
However, it might not be so for all shares. Some stocks do well during inflation than the rest. Here are 5 FTSE listed stocks that could help hedge inflation:
Secure Income REIT (LON:SIR)
The real estate investment trust company’s shares have a one-year return of 50.10 per cent and a year-to-date return of 27.83 per cent. They have a market capitalisation of £1,258.88 million.
Real estate companies have tenant agreements that account for a rent increase with inflation. Due to their exposure to warehouses and supermarkets, they managed to perform better in the last one year.
In the period between 8 April and 7 July, 98.7 per cent of the due rents worth £25.7 million have been collected. Annualised gross rent rolls of only 0.3 per cent is outstanding.
Segro Plc (LON: SGRO)
Shares of the property investment and development company have a year-to-date return of 22.84 per cent and a one-year return of 26.36 per cent. The shares have a market capitalisation of £14,084.82 million and a dividend yield of 1.89 per cent with a price-to-earnings (PE) ratio of 9.44x.
For the months between 1 January to 21 April, the company’s new headline rent increased to £18.0 million, compared to £14.3 million in the same period a year ago. New headline rents that were up for renewal and review increased over 12 per cent. The company reported high customer retention at 82 per cent, highlighting its high-quality assets located at prime sites.
BHP Group Plc (LON:BHP)
The shares of the Australia-based resources company have a one-year return of 18.98 per cent and a year-to-date return of 11.22 per cent. The shares have a dividend yield of 4.09 per cent and a PE ratio of 27.30x, holding a current market capitalisation of £46,845.75 million.
Higher commodity prices for mining companies would boost profitability. The price of iron ore, for example, has increased more than 100 per cent in the past year and is trading at a record level of $218 per tonne approximately.
For the nine months ended, 31 March, the company achieved record production at Western Australia Iron Ore. The company’s production guidance for iron ore and petroleum for the year 2021 remained unchanged. Guidance for copper has been increased to a range of 1,535 kt and 1,660 kt, highlighting more than expected robust performance at Escondida.
Rio Tinto Plc (LON: RIO)
Shares of the world’s second biggest metals and mining company have a dividend yield of 4.80 per cent and have a one-year return of 16.17 per cent. They have a market capitalisation of £74,005.92 million and a PE ratio of 15.83x.
Production costs of such mining companies are below $30 per tonne for iron ore, which can give a fair idea of the kind of profits they see currently.
For the second quarter, Pilbara iron ore shipments were down 12 per cent to 76.3Mt. Pilbara iron ore production was down 9 per cent to 75.9Mt.
Personal Assets Trust (LON: PNL)
The investment trust can invest wherever it wants to and has been positioned to hedge inflation for a while now. About 9 per cent of its portfolio is invested in gold, which is a safe hedge against inflation.
The trust’s shares have a one-year return of 8.49 per cent and a year-to-date return of 7.30 per cent. They have a dividend yield of 1.51 per cent and a PE ratio of 11.14. The shares have a market capitalisation of £1,620.69 million.
For the year ended 30 April, the trust’s net asset value per share increased by 9.1 per cent compared to a 22.1 per cent rise in the FTSE All-Share Index. Its share price increased by £38 in the year and at the end of the year was at £471.
