With global inflation concerns being the hot topic at the present time, buying higher-yielding stocks such as HSBC (LSE: HSBA) could be a shrewd move. Not only could they help an investor to overcome the problem of squeezing total real returns that higher inflation brings, they may also become more popular among a range of investors. This could mean they offer rising share prices and even higher total returns.
However, HSBC isn't the only dividend stock that could be worth buying today. Reporting on Tuesday was an industry peer which could generate impressive income returns.
The company in question is institutional stockbroker and corporate advisor Numis(LSE: NUM). It has experienced a strong start to the year, with sales being significantly ahead of the same period from the previous year. Part of the reason for this has been higher transaction volumes as well as higher average fees.
Improved performance has been delivered across both the Equities and Corporate Broking & Advisory parts of the business. The company's pipeline remains promising and includes IPO, capital raising and M&A opportunities. While converting those opportunities depends to a large extent on market conditions, the business seems to have a bright future.
Although Numis has a relatively modest dividend yield of 3.7% at the present time, its dividend growth rate could be high. Its payouts are currently covered 2.3 times by profit, which suggests that it could afford to make larger payments to its shareholders without hurting the sustainability of its business. As such, now could be the right time to buy the stock - especially with it trading on a price-to-earnings (P/E) ratio of just over 12.
Of course, HSBC also appears to have a bright future from an income perspective. It has a dividend yield of 5.2% at the present time, which is likely to remain well ahead of inflation even if there is a further spike in the price level. And with its dividends being covered 1.4 times by profit, they seem to be highly sustainable for the long term.
In fact, the bank could be set to increase dividends at a brisk pace over the coming years. It is in the process of making improvements to its business, and this could lead to a more efficient entity which is more focused on growth. Reduced operating expenses and further rises in demand for its services from customers in Asia could be the key catalysts for improvements in its bottom line. This could translate into dividend growth, with earnings due to rise by 4% in the current year and by a further 5% next year.
Of course, the outlook for the global economy has become more uncertain in recent days. Volatility across the FTSE 100 could be high. But with impressive income prospects, HSBC could be a strong performer in the long run.
5 shares to beat inflation
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Peter Stephens owns shares in Numis and HSBC. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.