Buying these top stocks can make me a second income to counter inflation

Although inflation in the UK has slowed, it has remained above 10% for the past three months. Such is the pest that destroys the value of my money.

One way I try to balance this is by creating double income from dividend stocks. These returns could help offset the impact of high inflation for the rest of the year and beyond. Here’s how I do it.

Ignore growth, focus on income

The top stocks I focus on are those that pay dividends. For this strategy, I ignore growth stocks. This is because this type of company usually reinvests all profits back into the business to increase growth. It leaves little or no cash to pay out to investors.

On the other hand, more mature companies that have reached scale often use attractive dividends as a way to attract investors. Profits can become more stable and, over time, a track record of payment history can be built up. Of course, dividends are not guaranteed, but this is an unavoidable risk.

Finally, there is an overlap where I can find stocks that pay some income but are also growing. I am not very happy with this area right now. As I try to keep up with high inflation, I want to be very focused on maximizing dividend potential and not sitting on the fence.

Stocks with decent yields

I like the sweet spot found with dividend yields between 5% and 7.5%. This is my area of ​​interest because it is above FTSE 100 yielded an average of 3.61%. But it contains a wide selection of companies (13) that fit the bill. So, I can invest in a mix of stocks from different sectors to diversify my overall portfolio.

The obvious question is why invest to get this result when inflation is around 10%? Shouldn’t I buy it? persimmon with 16% yield or Ferrexpo with a yield of 15%? This could result in a net positive result this year.

One concern I have with these ultra-high yielding stocks is that they are not sustainable. For example, Ferrexpo’s yield increased as the stock price fell 47% over the past year. I thought the dividend could be reduced, so I stayed.

Furthermore, inflation is expected to drop to around 5% by the end of this year. Admittedly, this is just a guess. But if it’s true, my target results will be enough to make me a real profit.

Make my money

The second income received from this year’s dividend can be used in different ways. I want to reinvest as much as possible, to help compounding the proceeds. If I take the dividend and keep it in cash, I will lose it again to inflation. However, the income gives me the flexibility to either spend the funds or reinvest, a valuable advantage.