•The Trap: Many High Yield ETFs (Tier 4/5) have flat or declining distributions. 10% yield on a declining share price is a pay cut.
•The Math: At 3% inflation, your purchasing power halves every 24 years.
•The Solution: You must allocate 30-50% of your portfolio to Dividend Growth (Tier 2).
•The Magic: Companies like Home Depot or Broadcom raise their dividend by 10% annually. This is your inflation shield.
Fixed Income vs. Growing Income
Bonds pay "Fixed Income." $1,000 bond pays $50/year. Forever. In 20 years, that $50 buys a sandwich.
Dividend Growth stocks pay "Growing Income." In 2012, SCHD paid ~$0.90/share. In 2024, it paid ~$2.90/share. Your income tripled while you slept. This crushed inflation.
The "Barbell" Strategy
You don't have to choose. Use a Barbell approach:
The Income Weight
SPYI / JEPI (High Yield)
Pays the bills TODAY.
The Growth Weight
SCHD / DIVO (Dividend Growth)
Pays the bills TOMORROW.
Conclusion
If you are young, lean heavily into Growth. If you are retired, you still need at least 30% in Growth to ensure you don't outlive your purchasing power.