Are dividend stocks positioned for inflation? Are dividend stocks positioned for inflation? http://www.federatedinvestors.com/static/images/fhi/fed-hermes-logo-amp.png http://www.federatedinvestors.com/daf\images\insights\article\chess-game-outdoor-small.jpg August 10 2021 August 10 2021

Are dividend stocks positioned for inflation?

It depends on each company's pricing power.

Published August 10 2021
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Video Transcript
00:04
I'm Daniel Peris, Senior Portfolio Manager at Federated Hermes.
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Are dividend stocks well-positioned for a higher inflation, strong-growth environment?
00:13
It really depends on a company's pricing power. Let's say the inflation not only materializes as it has in the past sort of couple months, and whether that is sustained or not we'll see, but if it is, it really depends on companies' pricing power. And so active portfolio managers, investors will want to keep a keen interest in the ability of their companies to take what's called take pricing to manage input cost increases. It's just business, folks. Again, many of the companies, particularly the older economy companies that a dividend investor's going to be focused on, have been around for a hundred years. They've seen waves of inflation, less inflation, higher rates, lower rates. There is a, you know, an old playbook that just needs to be dusted off. We haven't had significant inflation in a long time. We haven't had high rates in a long time. But these companies should be able to handle that, some better than others grant you, but it's just part of the equation of being in business. And so we're not particularly concerned about a return of nominal inflation of a couple percent. Actually, that's would be helpful. Again, dividends are paid and earned in nominal dollars. So an increase in inflation means more dividends. One would be concerned if we had a return to 1970s inflation. No one's discussing that. That's just not really in the cards. So we're pretty actually agnostic about the inflation question. It's just one of many business questions that a conscientious portfolio manager or business investor through the stock market has to attend to. It's not necessarily the only one, shall we say.
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Disclosure: Views are as of July 16, 2021 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Investments are subject to risks and fluctuate in value. There are no guarantees that dividend paying stocks will continue to pay dividends. In addition, dividend paying stocks may not experience the same capital appreciation potential as non-dividend paying stocks. Past performance is no guarantee of future results. Federated Equity Management Company of Pennsylvania 21-30333 (7/21)
Tags Fixed Income . Markets/Economy .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Investments are subject to risks and fluctuate in value. There is no guarantee that any investment approach will be successful.

There are no guarantees that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks.

Past performance is no guarantee of future results.

Federated Equity Management Company of Pennsylvania