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The cost of alternatives during price hikes
In periods of high inflation, the rate of risk-free assets usually rises, making dividends less attractive. Why risk it in stocks with a 3-4% yield if treasury bonds can provide a comparable return with lower risk?
If dividends do not grow faster than inflation, they lose their value as an investment tool.
The purchasing power of your dividends falls if the business lacks pricing power. When investing in aristocrats, you should demand not only a history of payments but also profit growth rates that outpace price increases in the economy. Otherwise, it is just a slow consumption of capital.
#portfolio #inflation