Income stock valuations are strongly affected by interest rates. When government bond and cash yields rise, investors demand higher dividend yields or more reliable growth from equities.
Spreads reflect risk compensation
A narrow spread between dividend yield and bond yield leaves less room for error. Without dividend growth, capital may shift toward lower-risk assets.
Dividend growth matters more than static yield
Companies that can raise dividends sustainably are often more attractive than high-yield names without growth. Free cash flow and payout policy stability are key.
