The new month brings some new opportunities to tackle some old problems. UK inflation hit 10.1% in September, the same level it was at back in July. Without banging the same old drum too hard, I think that dividend shares are a good way for me to offset some of this inflationary pressure. The income isn’t a perfect counterbalance, but it’s certainly one of my best options for a spare £500 as we hit November!
Mining for income gems
The first stock I’m keen on is the BlackRock World Mining Trust (LSE:BRWM). The investment trust focuses on holding a collection of shares within the commodity space. It also has the option to hold up to 10% of assets in physical metals (like gold).
At the moment, the dividend yield sits at 7.14%, with the share price also up 7.98% over the past year. I think this is a smart buy for me at the moment as I have one eye already on 2023. I think that companies in this sector should continue to benefit from the volatility in metal prices next year. On top of this, I think there are strong use cases for different metals rising significantly in value. For example, lithium should continue to move higher due to its role in electric vehicle batteries.
Some of the top holdings have done very well in 2022, providing me with confidence in the stock-picking ability from the trust manager. For example, Glencore is one of the largest holdings, with 8.44% of the portfolio.
This can also be flipped to a risk as the trust has some large, concentrated positions. This means that if one stock underperforms, it could drag down the overall price. From a dividend perspective, if a large payer such as Rio Tinto cuts the dividend, my income payout could be quite negatively impacted.
A dividend share in property
I think I’ll put the other £250 in Supermarket Income REIT (LSE:SUPR). As far as names go, the stock really does what it says on the tin! The real estate investment trust (REIT) owns supermarket property that it leases out to major chains including Tesco, Sainsbury’s and Asda.
In this way, the fund should rise in value over time due to the capital appreciation from the assets held. Yet crucially, it should provide a steady stream of income in the form of dividends from the lease payments received. At the moment the dividend yield is 5.81%.
Even though the property market in general could be in for a tough patch, I think this area of commercial property should be fine as we go into winter. Supermarkets are defensive stocks that usually perform well even in a recession. This is because the goods offered are essential for consumers.
If the supermarket has steady demand, payments to the income REIT should continue to be paid. I don’t see a scenario where a major UK supermarket gets into financial trouble in the near term.
There’s a risk that the value of the property owned by the REIT falls. However, I’m not too concerned about this as unless the business sells the plot, it won’t realise this as a loss.
Both of the above stocks will go some way to help me offset the impact of inflation. I’m considering buying both stocks in November.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Sainsbury (J) and Tesco. 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.