Last week, income-oriented investors were dished out a surprise they had largely forgotten was even possible. That is, for the first time since 2008, short-term bond yields were greater than the payments being made by some of the market’s best-known dividend stocks. Specifically, the dividend yield for the S&P 500, as a whole, was surpassed by the yield of three-month Treasuries.

Yep, the ongoing rise in the Fed Funds Rate, and expectations for three or four more rate hikes before the end of the year, was and is the culprit. The crash course in inter-market dynamics is a bit irrelevant at this point, though. What matters most to investors here is getting a grip on whether dividend stocks are (relatively speaking) assets or liabilities.

Here’s a primer to answer the question for yourself.

By the Numbers

For the record, the current yield on three-month Treasuries stands at 1.89%, just edging out the S&P 500’s dividend yield of 1.83%.

It’s not an entirely fair comparison, to be clear. Many of the S&P 500’s strongest constituents like Adobe Systems Incorporated (NASDAQ:ADBE) and Facebook, Inc. (NASDAQ:FB) are more than capable of paying a healthy dividend, but choose not to pay one at all.

Conversely, some of the S&P 500 companies were built from the ground up as dividend stocks. AT&T Inc. (NYSE:T) and utility giant Consolidated Edison, Inc. (NYSE:ED) come to mind.

To that end, the sliver of the S&P 500 known as the Dividend Aristocrats — companies with the primary goal of offering recurring income to shareholder — may be a more meaningful comparison. Its average yield right now? Closer to 2.65%. So, income seekers can still find better yield opportunities if they really want them.

The point is well taken, though. For the first time in a long time, dividend stocks aren’t the only game in town. The yield on 30-year Treasuries (for investors that can stick with them that long) now stands at 3.23%, trouncing all other reasonable income-driving options.

What’s an investor to do? Start by embracing the pros and the cons.

The Pros of Dividend Stocks

Dividends grow – The current yield on dividend stocks may be less than thrilling in light of the alternatives, but there’s an upside to them. As corporate earnings grow in step with the economy, payouts improve. The 53 stocks that currently make up the S&P 500’s Dividend Aristocrats have each increased their dividends each year for at least the past 25 years.

With the exception of TIPS (Treasury Inflation-Protected Securities) bonds, bond yields are static once that bond is put into the marketplace.

Liquidity – Not that you can’t sell a bond or liquidate a CD before its official maturity, but doing so isn’t quite as simple as shedding a stock. Pricing isn’t always perfectly clear for a bond sale, and there’s not always a willing buyer ready to pull the trigger as there are for stocks.

The Cons of Dividend Stocks

Volatility of principal – Not that the underlying value of a bond can’t change once it’s bought, but bond values generally don’t change nearly as much as stock prices do for any given day, week, month or year. So, if you’re looking for income but think you might also need to tap into your principal in the foreseeable future, dividend stocks could prove frustrating.

Greater odds of payment cuts – Though companies can and sometimes do halt or reduce interest payments on their debt, it’s a rarity to do so. Bonds are in effect a legal obligation, and bondholders get first “dibs” on a company’s income, or its assets if forced to liquidate.

Not so with dividends. Dividends are purely elective, and though most companies try their hardest to maintain dividend payouts, there’s no legal obligation for them to do so.

The Winner Is Dividend Stocks

Don’t misread the message. Bonds, short and long duration, have their place in many portfolios.

But for most investors, income, growth, and income growth itself has to at least keep up with inflation. Ideally, it would outpace inflation. With a stated annualized consumer inflation rate of 2.46% and an effective inflation rate that seems to easily exceed that figure, current bond yields aren’t going to cut it. Even future bond yields may struggle to do the job.

Thus, in the current market environment, dividend stocks may in some ways be the safer way to go — even if it means holding your nose and diving into names you know might be less stable than bond prices.

The only “trick,” so to speak, is limiting yourself to dividend stocks you know to be reliable payers. The S&P 500’s Dividend Aristocrats list would be a great place to start, and perhaps finish, that search.

Or, as a hybrid alternative, income-minded investors may want to explore preferred stocks.

They’re still equities, with all the risks thereof. And, preferred stockholders still sit behind bondholders in the payout hierarchy. Preferred stock owners also don’t fully participate in a company’s growth. All the same, in cases where income is more important than growth, preferred shares solve a unique problem.

As of this writing, James Brumley held a long position in AT&T. You can follow him on Twitter, at @jbrumley.