Inflation was stubbornly low in the U.S. in 2015, but it's picked up in the first two months of this year. If consumer spending continues to improve and fears of another recession ebb, inflation could become a concern once again.

For those who are staring retirement in the face, having the returns on their investments beat the pace of inflation is the topmost priority.

Here are three dividend gems that can keep that income flow steady and comfortable, no matter how inflation moves. With attractive yields, consistent dividend increases, strong competitive advantages and good growth potential, these three stocks are the kind of investments that typically find favor with Warren Buffett. These equities should be an integral part of your long-term wealth-building plan.

 

1. AT&T (T)

U.S. telecommunications major AT&T has been known for its fantastic track record when it comes to dividend growth, even during gloomy recession periods. The dividend aristocrat has grown dividends non-stop for the last 32 years and currently has an attractive dividend yield of 5%, which is even higher than peer Verizon's 4.3%.

What's encouraging to know is that after trading in a band since Oct 2013, AT&T has finally broken free of that range and has moved higher in the New Year. On a year to date basis, the stock has recorded gains of close to 14%, outperforming the recovering but flat S&P 500.

The company, which operates in a sector which has a high barrier to entry owing to its huge capital requirements, is poised to benefit from its acquisition of DirecTV and as consumers' data usage increases further. It is even upgrading its technology to stay in the game by planning to move 80% of its applications into a private cloud by the end of the year. With an aim to cement its position in international markets, too, AT&T acquired Lusacell and NextelMexico to expand into Mexico.

Over the past four quarters, AT&T has either beat or met analyst expectations on earnings-per-share (EPS). For 2016, analysts expect a 5% rise in annual EPS to $2.85, and another 4.5% thereafter to $2.98.

AT&T's low beta of 0.28 and high yield despite stock price fluctuations and recessionary trends qualify it as a classic safe stock to hold.

 

 

2. Archer Daniels Midland (ADM)

Another company with excellent competitive advantage is agriculture products powerhouse, Archer Daniels Midland. To match its crop origination and processing capabilities, any competitor will have to invest billions of dollars.

Powered by its robust supply chain, which includes 39 innovation centers, around 250 warehouses and terminals and over 450 procurement facilities, Archer Daniels Midland has steadily grown to be responsible for over 15% of the globe's wheat and corn crops and over 30% of the globe's soyabean crop.

With the world's population expected to grow to 9.7 billion by 2050, there will only be more stomachs to feed and Archer Daniels Midland is bound to benefit from this need.

While that is the big picture, Archer Daniels Midland is also taking the right steps to boost profitability through inorganic growth by its acquisitions of Kentucky-based flavorings and additives company Wild Flavors and organic and Iowa-based gluten-free products company Harvest Innovations.

While the company is governed by commodity price movement, it has not let any down cycles in commodities affect its dividend payments. In fact, it has grown payments for a staggering period of over 40 years, and the payout ratio of under 40% only exposes more room for further dividend hikes. It has a decent dividend yield of 3.3%. ADM should be a part of your core dividend portfolio.

3. Southern Company (SO)

Electricity producer Southern Company has paid out dividends longer than some companies may have been in existence. The company has paid dividends for 269 consecutive quarters since 1948 and has grown them every year since 2002.

At a chunky yield of 4.3% and a history of outpacing the S&P 500 for decades, Southern is also an attractive bet for superior total returns. If we consider a 15-year period, Southern has even outpaced the broader utilities sector in terms of total return.

Southern's competitive advantage perhaps lies in the fact that it is the only electric utility in the U.S. that is exposed to coal gasification,nuclear, natural gas, wind, solar and biomass. Its geographic presence and strong relationships with regulators serve as added advantages.

After the completion of its acquisition of natural gas utility AGL Resources later this year, the company will double customer count to about 9 million, and it will go from being only electric to one that is an equal amount of electric and gas. Also, its earnings which have historically grown 3% annually are expected to grow at 4%-to-5% in the long term post the merger. The merger also is enabling higher growth in dividends, if the board approves.

If the earnings growth figure is indeed achieved, investors stand to gain 8.5%-to-9.5% in total returns in the future.

Are you making the right investment moves for your retirement, or are you blowing it by making all-too-common money mistakes? There are crucial steps that you should be taking now, to build wealth over the long haul. To find out whether you'll have enough money in your later years, download our free report: Your Ultimate Retirement Guide.

 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.