Written by Kay Ng at The Motley Fool Canada
Grocery bills only go higher as we experience inflation. MoneySense noted that the food price inflation in Canada averaged about 10.5% from 2021 to 2022. And a report by Canadian universities predicts that it could go up another 5-7% this year. Thankfully, the government had a talk with the heads of five big grocery chains that have now agreed to work with the federal government to stabilize food prices in Canada.
Here are some more ways to help you battle inflation. First, buying in bulk may help you save on a per-unit basis. For example, go grocery shopping with your sibling or a friend at Costco and split the big packages. Second, buy items on sale you need or anticipate you’ll need soon whenever possible. Certain grocery stores might have different items on sale. You might stock up on discounted items like toilet paper or meat that can be put in the freezer. Third, invest less today to have more tomorrow — for groceries and more!
Invest less today to have more tomorrow
Your investments today can help pay your future grocery bills, cell phone bill, or even vacation. That is, aim to invest for a return that’s higher than inflation. For example, you can boost your income with dividend stocks that are set to grow your money, making it potentially worth more in the future. Since $1 is worth less in the future due to inflation, all else equal, it’s better to invest money today rather than tomorrow.
Because the Bank of Canada has raised the benchmark interest rates since 2022, inflation is being curbed. So, in time, we will see it back at the Bank’s target range of 1-3%. Still, in the relatively high inflationary environment today, investors can target to own stocks that have double-digit growth potential. Particularly, it would be more defensive to put dividend stocks on your radar.
A dividend stock to put on your radar
Canadian National Railway (TSX:CNR) is a nice example of a trustworthy blue-chip stock to own for your long-term diversified portfolio. In the last 10 years, for instance, the railway stock delivered annualized returns of about 13.5%, beating the Canadian stock market’s return of 8.3% per year in the period. In other words, CN Rail stock transformed an initial investment of $10,000 into about $35,680.
CN Rail is the backbone of the economy. It transports more than $250 billion worth of goods every year! It reported net income of $5.1 billion in 2022, equating to a solid net margin of 29.9%. The stock tends to be weaker during recessions.
At $152.72 per share at writing, the railway stock appears to be fairly valued, trading at about 20.6 times adjusted earnings. Since economists predict a potential recession in Canada and the United States by 2024, patient investors can see if the stock would pull back another 10% before buying shares.
No matter the economic environment, CN Rail boosts investors’ confidence by paying a safe dividend. In fact, CNR has increased its dividend for about 27 consecutive years with a five-year dividend-growth rate of 12.2%.
The post Hate Your Rising Grocery Bill? 3 Ways to Battle Inflation and Come Out on Top appeared first on The Motley Fool Canada.
Before you consider Canadian National Railway, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023... and Canadian National Railway wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/16/23