We saw the news hit the tape on Friday, the highest consumer price index reading in almost 40 years. Despite the Biden administration’s disclaimer that the data was “backward looking,” which indeed it was, there isn’t a soul on Wall Street or in the Federal Reserve that still feels that the current inflation is “transitory.”

If any data set can stir arguments among economists, it is probably consumer and producer price index numbers, and with good reason. Rising consumer and producer prices can signal the start of an inflationary period for an economy. Even moderate inflation can rapidly erode purchasing power and can create uncertainty as businesses have more difficulty estimating future costs.

However, some companies are almost impervious to inflation. Hard assets, commodities, real estate, utilities and other areas often can perform well in an inflationary and a rising interest rate environment. We screened the Goldman Sachs Americas Conviction List of top stock picks looking for the kind of companies that can fare well in 2022 and found five that pay reliable dividends and look like very solid ideas. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Alcoa

This company could be a solid play for more conservative investors looking to the mining sector. Alcoa Corp. (NYSE: AA) produces and sells bauxite, alumina and aluminum products. The company offers aluminum sheets for the production of cans for beverage and food.

Alcoa also engages in the aluminum smelting, casting and rolling businesses, as well as generation and sale of renewable energy and provision of ancillary services.

The analysts said this recently about inflation related issues at the company.

While we note meaningful investor focus on cost inflationary pressures in Europe, we note that the leverage to higher aluminum and alumina prices should outweigh the impact of higher power prices. We believe that the ~16% underperformance in shares relative to peer, Norsk Hydro is unwarranted, and with the energy cost impact now better understood, see runway for the shares to re-rate higher

Shareholders receive just a 0.83% dividend. The Goldman Sachs price target for Alcoa stock is $63, while the consensus target is $59.61. The shares closed on Friday at $48.80.

With the potential for a very cold winter, this company may look to extend gains into 2022. DTE Energy Co. (NYSE: DTE) is the largest utility in Michigan. Its largest operating units are DTE Electric, an electric utility serving 2.2 million customers in southeastern Michigan, and DTE Gas, a natural gas utility serving 1.3 million customers in the state. DTE Energy also has non-utility energy businesses that focus on power and industrial projects, natural gas midstream and energy trading.

The company’s Gas segment purchases, stores, transports, distributes and sells natural gas to residential, commercial and industrial customers throughout Michigan, and it sells storage and transportation capacity. This segment has approximately 19,800 miles of distribution mains, 1,305,000 service pipelines and 1,273,000 active meters, as well as approximately 2,000 miles of transmission pipelines.

Its Gas Storage and Pipelines segment owns natural gas storage fields, lateral and gathering pipeline systems and compression and surface facilities. It also has ownership interests in interstate pipelines serving the Midwest, Ontario and northeast markets.

The company’s Power and Industrial Projects segment offers metallurgical coke; pulverized coal and petroleum coke to the steel, pulp and paper, and other industries; and power, steam and chilled water production, and wastewater treatment services, as well as supplies compressed air to industrial customers.

Shareholders receive a 3.05% dividend. Goldman Sachs has a $138 price target, well above the $126.19 consensus target and Friday’s closing price for DTE Energy stock of $116.22 a share.

Fifth Third Bancorp

This top super-regional bank stock remains incredibly cheap. Fifth Third Bancorp (NASDAQ: FITB) is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent of Fifth Third Bank, National Association, a federally chartered institution.

As of March 31, 2021, the company had $207 billion in assets and operated 1,098 full-service banking centers and 2,383 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. In total, Fifth Third provides its customers with access to approximately 53,000 fee-free ATMs across the United States.

Fifth Third is among the largest money managers in the Midwest and, as of March 31, 2021, had $464 billion in assets under care, of which it managed $58 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses.

The company posted very solid results this year, and many feel that management’s guidance is very conservative going forward.

Holders of Fifth Third Bancorp stock receive a 2.74% dividend. The $51 Goldman Sachs price target compares with a $48.86 consensus target. The shares closed on Friday at $43.76.

This is one of the top picks across Wall Street in its sector and an outside way to play the electric vehicle trend. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and moly producer, as well as the eighth largest gold producer. Its key operating and development assets are in Indonesia, North America, South America and Africa.

Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects, and it clearly would benefit from stronger demand and higher prices for industrial commodities.

Trafigura’s Chief Economist Sadd Rahim recently told analysts that he remains bullish on the current commodity cycle and sees room for significant further upside potential to commodity prices over the next one to three years. In particular, this is due to accelerating demand growth, excluding China and supply constraints. He believes that this cycle is in the very early stages, as key demand drivers, such as pent-up consumer demand, accelerating global capital expenditures and massive stimulus in the United States, have yet to fully kick in.

The dividend yield is 0.78%. The Goldman Sachs has set a $46 price target. The consensus target for Freeport-McMoRan stock is $42.29, but shares closed at $38.37 on Friday.

Realty Income

This is an ideal stock for growth and income investors looking for a safer idea moving forward. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.

The company is structured as a real estate investment trust (REIT), and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants.

To date, the company has declared 604 consecutive common stock monthly dividends throughout its 51-year operating history and increased the dividend 108 times since its public listing in 1994, and it is a member of the S&P 500 Dividend Aristocrats index.

Investors receive a 4.41% distribution. The Goldman Sachs price objective is $87. The consensus target is $79.12, and Realty Income stock closed at $66.94 on Friday.

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The highest inflation reading in nearly 40 years is very concerning, and while prices may moderate some, between increased demand and supply constraints, it is a good bet it will be much later in 2022 before we see sharp declines in prices. All these top stocks offer very good entry points at current levels.

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