Have you heard? The U.S. Postal Service (USPS) just raised the price of a Forever stamp to $0.55 from $0.50. This is the sharpest percentage increase (10%) since 1991 — and the biggest hike on record in nominal terms.
As a young financial advisor in the late 1990s, I would always stress the impact of inflation when meeting with prospective clients, modeling it into any retirement funding projections. And the best way to drive home the point was to show how stamp prices had increased steadily over the years. In fact, they are directly tethered to inflation rates.
Back then, stamps had doubled in price from $0.15 to $0.32 over the prior two decades. Twenty years later, and they’ve continued to march all the way to $0.55. How long do you think it will be before they hit $0.60, or $1.00?
An acquaintance of mine had the foresight back in 2007 to “invest” $1,000 in Forever Stamps, purchasing 2,439 at a fixed price of $0.41 each. It really wasn’t that different from speculating in commodities by using futures contracts. She didn’t do too bad.
The value of those 2,439 stamps has now risen to $1,341, an increase of 34.1%.
And if you think that’s crazy, then get this… Since 1960, the price increase of a first-class postage stamp has outpaced inflation (1,275% vs 748.3%) — but is dwarfed by a 4,400% increase in the S&P 500.
Postage prices were (and still are) an easy way to demonstrate how inflation steadily erodes the purchasing power of a dollar over time. Of course, the same is true of most any good or service. A standard grocery basket filled with 20 household staples including milk, eggs, bacon, butter and tomatoes that cost $54 in 2008 would now ring up at $73 for the same items.
That’s an increase of 35% over the past decade.
Here’s Why This Matters
Fortunately, dividend stocks can be the ideal way to stay a step ahead of inflation.
Take one of our own holdings over at High-Yield Investing, Occidental Petroleum (NYSE: OXY). While grocery prices have increased by 35% since 2008, OXY’s quarterly dividend distributions have risen from $0.25 to $0.78 per share — an increase of 212%.
So, while the stock yields about 4.7% today, an investor with a 500-share position would have seen annual dividend paychecks triple to $1,560 from $500 over the course of a decade. That’ll buy a lot of milk and eggs.
Of course, OXY is just one of many holdings in High-Yield Investing that are rewarding investors with a growing income stream. In fact, I just recently told my premium subscribers about four more dividend hikes taking place with our portfolio holdings.
The point: you’ll need to draw more income from your nest egg in the future to maintain the same standard of living.
It sounds simple, but most investors just don’t seem to realize it.
And if you’re thinking you can make do with income from a pension plan or Social Security — then think again. That’s why having a portfolio of solid dividend payers in your corner is so important…