Can High Dividends Combat Inflation And Rate Hikes?
Investors looking to combat rising inflation might be tempted to tilt their portfolios towards investment that pay high dividends. Is it a sensible strategy?
Written by Patryk Dyjecinski

IFA and Founder of Clara Wealth

Investors looking to combat rising inflation might be tempted to tilt their portfolios towards investment that pay high dividends. However, this research from Mia Huang at Dimensional Fund Advisers suggest that this might not be a good strategy.

KEY TAKEAWAYS

  • With inflation at its highest level in decades and the US Federal Reserve raising interest rates, investors may be wondering whether they should devote more of their portfolios to dividend-paying stocks.
  • There’s no strong evidence that dividend stocks have delivered superior inflation-adjusted performance during periods of high inflation or rising interest rates.
  • Investors can put themselves in a better position to achieve their financial goals by staying disciplined, diversifying broadly, and considering strategies designed to outpace or hedge against inflation and rising rates.

You can download the research here:

We have already argued against chasing dividend yield in this previous blog entry: Investing for income/natural yield – please reconsider!

Please contact me at Clara Wealth Management at contact@clarawealth.co.uk or on 0207 097 4968 if you want to find out more or have any comments.

Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and you may get back less than you invest.
Dividends are taxable at your highest rate of income tax.