UK markets open in 1 hour 6 minutes

£5k to invest? 2 inflation-beating dividend stocks I’d buy to protect my shares portfolio

Royston Wild
Hand holding pound notes

It’s no mystery as to why Domino’s Pizza Group’s (LSE: DOM) share price has held up so well of late: takeaway orders look set to boom. The foodie has fallen just 10% in value during the past month because of this.

Panic buying is stripping supermarket shelves and leaving households short of important ingredients. At the same time, restaurants are closing and people are spending more and more time at home. The perfect blend for demand for comfort foods like pizzas to thrive, right?

It’s not likely to prove a short-term phenomenon, either. Government has previously warned that the coronavirus could remain at elevated levels until September. And through steady expansion Domino’s is well placed to deliver to doors all over the country (it opened another 32 stores in the UK and Ireland last year).

Grab a slice

City analysts expect earnings at the pizza powerhouse to slip 4% in 2020. It’s an estimate that clearly has plenty of scope for upgrades as the year rolls on and Covid-19 keeps Britons cooped up. Don’t think, however, that Domino’s is just a great stock for the short haul. Through that aforementioned expansion scheme and the huge investment it’s made in its digital capabilities (online sales leapt 8.6% year on year in 2019 as a result of these actions) its a company in great shape for the long haul.

At current prices around 280p per share, Domino’s trades on a price-to-earnings (P/E) ratio of 16.5 times. It’s higher than a lot of stocks following the recent cross-market washout. Still, it’s a small premium to pay given its strength in otherwise tough times. It’s also quite reasonable given that high chance of forecast upgrades, too.

Besides, a chunky 3.5% dividend yield for 2020 helps to take the edge off this slightly-high rating. Domino’s is a share I’d happily buy today and hold for the rest of the decade.

In good health

Alliance Pharma (LSE: APH) is another terrific share that should thrive in these testing times. It’s not just that healthcare is one of the classic safe haven sectors in times like these, a reflection of the resilient nature of medicines demand whatever the weather. It’s that this firm, by also offering regular drugs delivery services, is likely to witness growing demand from an increasingly quarantined population.

This AIM-quoted stock was already sitting very pretty anyway. Through its extensive distribution, wholesale, and retail operations it’s well placed to capitalise on Britain’s ageing population, a demographic change that will drive demand for pharmaceutical, medical, and healthcare products of all types. Sales of its star pharmaceutical brands are ripping higher globally as well.

Alliance Pharma’s share price has dived a whopping 26% over the past month. It’s a decline that flies in the face of its obvious defensive qualities. City analysts predict another 7% profits rise for 2020, incidentally. This leaves it boasting a rock-bottom forward P/E ratio of 11.6 times and a 2.9% dividend yield, too. I think this share’s too good to miss at current prices.

The post £5k to invest? 2 inflation-beating dividend stocks I’d buy to protect my shares portfolio appeared first on The Motley Fool UK.

More reading

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Alliance Pharma and Domino's Pizza. 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.

Motley Fool UK 2020