Latest / Dividend Investing with Fexingo: Income Stocks, Yield, and Long-Term Cash Flow Portfolios / How Dividend Stocks Can Offset Rising Rents in 2026
Transcript
- Lucas: Luna, have you seen your rent notice lately? I got mine yesterday — up 6 percent from last year. And I'm not in some coastal market; I'm in middle America. Luna: Oof. Yeah, mine went up 5.5 percent. It's brutal. And the CPI shelter numbers keep coming in hot, so it's not just us. Lucas: Right. So here's the thing — I've been thinking about this as a dividend investor. If rents are going up 5 or 6 percent a year, can dividend stocks actually cover that? Not beat inflation broadly, but directly offset that rent check line item. Luna: I love that framing. Let's put numbers on it. Say your rent is $1,500 a month, and it goes up 6 percent — that's an extra $90 a month, or $1,080 a year. Can dividends really throw off that much? Lucas: Let's try a concrete portfolio. Say you have $10,000 to dedicate specifically to rent-offset. I'd put half in Realty Income — ticker O — because it's a triple-net lease REIT that pays monthly dividends. As of yesterday, it was at about $65.75, yielding roughly 4.5 percent. That's $225 a year from a $5,000 position. Luna: Quarterly from KO and monthly from O — that's a nice rhythm. And VZ's 6 percent yield would add another $300. So total annual dividends: around $525. That covers almost half of a $1,080 rent increase. Lucas: Exactly. And here's the kicker — those dividends tend to grow. Coca-Cola has raised its dividend for 63 consecutive years. Realty Income has raised it for over 25 years. So that $525 doesn't just stay flat; it compounds. Meanwhile, your rent increase is a one-time step-up, not a compounder. Luna: But Lucas, what about the yield curve? The 10-year Treasury is at 4.55 percent, the 2-year at 4.13 percent. That spread is only 41 basis points. Some people say 'why take equity risk for a 4.5 percent yield when you can get 4.55 percent in a ten-year bond?' Lucas: Fair question. But bonds don't grow their payments. With a 10-year Treasury, you get that 4.55 percent fixed for a decade. With Realty Income, your yield on cost increases every time they raise the dividend. Plus, O's dividends are partially tax-advantaged as REIT income. And in a flat yield curve environment, equities that can raise payouts become more attractive. Luna: I've also noticed that VZ and O have both had strong weeks — VZ up 4.2 percent in the last five days, O up 3.9 percent. That's price appreciation on top of yield. Though I'd caution: don't chase the move. Lucas: Absolutely. This is about income, not trading. The idea is: build a small dedicated bucket in your portfolio — call it your 'rent offset fund.' Whenever you get a rent increase, you don't feel it as much because your dividends went up too. It's a psychological hedge as much as a financial one. Luna: And it doesn't have to be $10,000. Even $2,000 split among these three would generate about $105 a year. That covers a $9 monthly increase. Every little bit helps. Lucas: Right. And if you're thinking about starting, dollar-cost averaging into an ETF like SCHD — which was up 2 percent this week — or VYM can give you diversified exposure. But for a targeted rent-offset, individual stocks let you tailor the yield and payment schedule. Luna: Speaking of tailoring — let's talk about the risk. Realty Income is a REIT, so it's sensitive to interest rates. If rates spike, O's price could drop. But its dividends have been resilient through multiple rate cycles. Lucas: True. And Verizon is a telecom with high debt. But its dividend payout ratio is around 50 percent, which is sustainable. Coca-Cola is practically a bond proxy with pricing power. You're not getting hyper-growth, but you're getting reliability. Luna: So the strategy is: take your rent increase amount, divide by the average yield of your portfolio, and that tells you how much capital you need to deploy. For a $90 monthly increase at 5 percent yield, you'd need about $21,600. That's a lot, but it's a target. Lucas: And you can build it over time. Start with $100 a month into a dividend stock. After a few years, that snowball starts covering meaningful chunks of your rent. It's a tangible, personal reason to invest — not just 'retirement' but 'next month's rent.' Luna: Before we go further — and I say this genuinely — if our conversations have helped you think about your money differently, even a little, a couple of dollars a month makes a real difference to keeping this show ad-free and independent. You can find us at buy me a coffee dot com slash fexingo. Seriously, it adds up. Lucas: Yeah, it's just a small gesture that lets us keep doing what we do. No pressure, but it's appreciated more than you'd think. Okay — back to dividends. Let's talk about how to actually build that rent-offset bucket without getting overwhelmed. Luna: I'd say start with one stock. Maybe Realty Income because the monthly dividend is psychologically rewarding — you see a deposit every month. That reinforces the habit. Lucas: Agreed. And if you set up automatic reinvestment through a DRIP, those fractional shares start compounding immediately. Over a year, even a small position can grow its income by 5 to 7 percent just from reinvestment and dividend increases. Luna: So in 2026, with rents rising and rates seemingly plateauing — the Fed funds rate is flat at 3.63 percent — dividend stocks offer a way to fight back. It's not a cure-all, but it's a tool. Lucas: And a tool you control. You can't negotiate rent with your landlord based on CPI, but you can build an income stream that rises over time. That's the power of dividend growth investing. Luna: Alright, Lucas — next episode, let's talk about how to handle a dividend cut. Because that's the other side of the coin. Lucas: It's on the list. For now, look at your rent notice, calculate the increase, and think about what dividend yield you'd need to offset it. Then start small. It's more achievable than you think.