3 top dividend stocks yielding as high as 8.7% — with inflation still near 40-year highs, it might be a good move to nail down some income

3 top dividend stocks yielding as high as 8.7% — with inflation still near 40-year highs, it might be a good move to nail down some income

Inflation is on a white-hot tear.

U.S. consumer prices surged 8.3% in April from a year ago, down slightly from 8.5% in March, but still near 40-year highs.

Whether central bankers believe inflation is short-lived, prices are on the rise right now.

To preserve purchasing power, investors usually turn to assets like gold and silver during inflationary times. But dividend stocks are another option.

If a company can provide a rising stream of dividends over time while appreciating in value, that can give you a hedge against inflation.

Of course, due to an extended bull market, most stocks don’t pay much these days. The average S&P 500 company yields just 1.5% at the moment.

But there are companies with much more generous payouts. Here’s a look at three dividend stocks with above-average yields reaching as high as 8.7%.

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Bank of America (BAC)

Let’s start with a bank stock. Why? While many sectors fear rising interest rates, banks look forward to them.

Central banks hike interest rates to tame inflation.

Banks lend money at higher rates than they borrow, pocketing the difference. When interest rates increase, the spread for how much a bank earns widens.

And it just so happens that quite a few banks, such as Bank of America, have upped their payouts to shareholders over the past year.

In July, Bank of America boosted its quarterly dividend 17% to 21 cents per share. That gives the company an annual yield of 2.4% at the current share price.

The stock market had a sluggish start in 2022 and Bank of America is down 22% year to date. But a major rebound could be on the horizon. Goldman Sachs has a Buy rating on the company and a price target of $51 – roughly 43% above where the stock sits today.

Southern Co. (SO)

Moving up the yield ladder is Southern, a gas and electric utility holding company headquartered in Atlanta. It serves close to 9 million customers.

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