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The illusion of growth in defensive sectors
Investors often choose dividend aristocrats from utilities and consumer staples sectors, expecting stability. However, these companies rarely can pass inflation on to the consumer in full.
Logistics and raw material costs rise faster than companies can raise prices for their services. As a result, business margins compress, and dividend payouts begin to eat into the retained earnings that should go toward asset upgrades.
Ultimately, you get a fixed payment that stagnates while real prices around you are rising.
#stocks #inflation