Well, one of my oldest holdings, General Mills, reported earnings today. The story in short? Revenue rose, as did costs due to inflation and supply chain disruptions. Earnings fell from a year earlier as a result. On the bright side, company executives say that with more workers continuing to work from home, demand for its packaged food products remains strong.

The stock near the close of trading was down 4% on the day. Like a leopard in the bushes, I felt tempted to leap out and chomp down on a cheap buying opportunity. After all, the company said it’s brands continue to gain share and prospects for future growth remain bright.

But I couldn’t talk myself into taking that leap. General Mills, which has been in my portfolio for a couple of decades and has served me well as a source of dividend income and, for most of it’s tenure, modest price appreciation.

But General Mills is the ultimate “hold” stock these days. Stable enough (and providing a an attractive 3% yield) so that I don’t want to unload my stake. But alas, the lack of any likely spark for share price appreciation or an increase in the dividend leaves me without much impetus to buy. At least for the moment. It wouldn’t take much more of a dip in the share price to tempt me out of the bushes.

While that headline reflects the truth, inflation worries have tamed my equity investing appetite lately. The stock market’s long rise has me retreating to the sidelines for the most part. (Exception — and not a dividend play in the short term — I couldn’t help nibbling up a small stake on Toast (ticker TOST) when the restaurant automation company went public recently. Anyone who’s waited in a restaurant for what seems an eternity to get the attention of a server and pay a bill knows the restaurant industry is in dire need of automation technology, so that’s the value proposition there.)

Barron’s weighed in with an unusually pessimistic, or perhaps realistic, take on the inflation outlook recently. Here’s a link to the story. The headline sums things up pretty well. “As Labor Shortage Persists, the Fed Runs Risk of Runaway Inflation.”

The article posits that the Fed may have to start rising rates sooner, and more aggressively, than planned if the current labor shortage persists and wages continue to rise. Personally, I have a hard time cheering against higher wages. I remember staring at many a paycheck and thinking, “I’m worth way more than this.” And I suspect a lot of today’s workers similarly rebel against the notion that rising wages are a problem.

But rising prices are another issue. If wage gains and supply shortages continue to put upward pressure on prices, especially prices of consumer items tracked by key inflation measures, that could indeed lead to higher rates and put a damper on demand for dividend paying stocks, which have served as something of a stand in for bonds during this long period of historically low interest rates.

I pared my energy holdings a little bit this past week (and partly to free up funds to place my bet on TOST). For the most part, I’m sticking by my portfolio. But I wouldn’t be surprised to see stocks give back some of the big gains they’ve made in recent years. If I’m right, it may be better to wait to buy into the dividend world.

What do a 99 year old chairman, takeover rumors, and a 4.2% dividend portend? Perhaps a buying opportunity. Recently, Barron’s profiled Mercury General (ticker MCY), a California auto insurer that looks like a rare opportunity to buy a stock at an attractive price in today’s bullish stock market.

The PE ratio is attractive at about 7, or 14 for a forward PE ratio. At a market cap just above $3 billion, Barron’s says the stock could be an attractive takeover target for a larger auto insurer seeking a bigger presence in the California market, where Mercury General is the fourth largest auto insurer in the Golden State. The company also engages in other property and casualty business.

The stock price is up 34% year-over-year, but that’s in line with the overall market’s rapid rise over the past couple of years. Over the past five years, the stock is up only 9%, so it still looks like a possibly underpriced opportunity.

The short ratio, at 2.5% of float, is higher than average but not alarming. If I were in a mood and position to add a company to my portfolio right now, I think Mercury General might be the one. For a small to mid cap stock, the risk reward potential looks good.

Well, inflation clocked in at 5.4% in May, reigniting fears that rising prices are an endemic challenge. But frankly, the stock market seems to have shrugged the news off, with the major US indices down about a third of a percent the day the news came out.

And economists were quick to downplay the June inflation spike. Prices were sharply higher in several areas, such as hotels and airfare, that were down sharply a year earlier due to the pandemic. The economic consensus seems to be that the June number was a blip rather than a trend. I hope the economic consensus is correct.

I’m worried by consistently rising home prices, which tend to be underrepresented in the inflation numbers because the government has a complicated way of measuring “imputed rents” to offset higher home prices with lower interest rates, which reduce home payments for homebuyers financing their purchase with a mortgage. Personally, I think they should just measure the rise in home prices and not try to “impute” the impact of other economic factors on the cost of housing. But that’s an argument for another day.

At the moment, I’m pleased my dividend-heavy stock portfolio hasn’t taken more of a hit from rising inflation. Only my financial stock, Wells Fargo, and a REIT, Kimco, declined significantly today, about 2% each. Otherwise, my portfolio hung in there with only fractional price declines. And my tech stocks actually saw small gains on the day.

Still, inflationary expectations are a threat to dividend paying stocks, so I’ll be keeping a close eye on things.