Tariffs, Oil Shocks, and Inflation: The Best Dividend Stocks to Own Through It All
Key Points
This property company can continue to collect rent from retail and other tenants despite inflation, tariffs, and oil prices.
External threats are unlikely to hamper this data center REIT's growth.
Finding income stocks that are minimally affected by tariffs, inflation, and oil prices is a tall order. Inflation and oil prices affect almost every product either directly or indirectly, though one can stick to companies that operate domestically to avoid tariff-related shocks.
Such criteria are going to heavily restrict what dividend stocks one can pursue. Still, these two real estate investment trusts (REITs) should provide income and can still prosper even as tariffs, inflation, and oil prices hit consumers.
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Realty Income
Realty Income (NYSE: O) is a real estate investment trust that operates in many countries, but serves its customers locally, sidestepping any direct tariff-related effects. The company owns about 15,500 properties in nine countries.
Moreover, inflation means higher revenue for the company, which benefits shareholders. Also, tenants handle maintenance, insurance, and property taxes under their lease terms, resulting in steady revenue streams. Realty Income boasts a 99% occupancy rate and established clients ranging from Walmart to FedEx, always spurring the need for further acquisitions and development.
This business has paid a monthly dividend since 1994, which gets raised at least one time per year (and more often quarterly). At $3.25 per share annually, its dividend yield is 5.1%.
Over the last year, its stock price rose around 11%, and the share price has still not returned to its 2020 high. Admittedly, that makes Realty Income more attractive to income investors than growth investors. However, if you're looking for a stable stock with a high-paying, rising dividend, Realty Income can serve investors who want income without the volatility while avoiding exposure to many of the external threats that affect most dividend stocks.
Digital Realty
Digital Realty Trust (NYSE: DLR) is one of the leading data center REITs. The demand for these facilities is insatiable, making inflation much less relevant to its future. Also, since the electricity they need comes from varied sources, they are less affected by high oil prices.
Moreover, though its approximately 300 data centers span six continents, each is in one place, meaning no direct effects from tariffs. Grand View Research forecasts a compound annual growth rate (CAGR) of 11% for the data center market, making Digital Realty likely to sell any capacity it adds.
Digital Realty had a history of annual increases from 2005 to 2022. The payout has since plateaued at $4.88 per share, and its yield of 2.4% is more than double the 1.1% average for the S&P 500.
While the lack of increases may appear disconcerting, Digital Realty paused the payout hikes to free up more capital to add data center capacity amid insatiable demand. That move may ultimately profit investors more in the long term.
Also, the stock has risen by over 112% since bottoming in 2023. That means it has been more of a growth than an income stock in some respects. Nonetheless, as the company better capitalizes on this growing need, it should continue to generate higher returns without the external worries that have hampered the growth of other dividend stocks.
Will Healy has positions in Realty Income. The Motley Fool has positions in and recommends Digital Realty Trust, Realty Income, and Walmart. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.