I am not understanding why dividends would be a hedge against inflation. What is your reasoning there? In what way do dividends hedge inflation?

I'm guessing you might just be misunderstanding what dividends are. A dividend fund is going to have stock holdings in companies that provide a dividend or they are going to hold stock and then artificially generate a dividend from those holdings by doing things like covered calls. In either case these are still stock holdings, they can still very much go down. There isn't anything about dividends that is risk free in some way nor is it at all related to the inflation rate.

Imagine you had two funds. Both of these funds invested in companies within a sector that perform exactly the same in terms of their performance. Fund A invests in companies that do not provide a dividend, Fund B invests in companies that do. You invest $1000 in each.

Fund A gives a 10% return which is realized in growth. You end up with $1100.Fund B gives a 10% return which is realized in 6% growth and a 4% dividend. You end up with $1100.

When a company issues a dividend it comes out of their value. If there valuation has their total return at 10% and they issue a 4% dividend that means that their returns came 6% from growth and 4% from the dividend. The 4% isn't on top of the 10%, its part of it. You can see this in stock valuation. If a companys stock is valued at $100/share and it issues a 4% dividend then its stock valuation will drop to $96/share.

Within your three fund portfolio are going to be companies that issue dividends and thus those funds (at least the non-bond funds) will give you a dividend as part of their total return. Selecting a dividend fund would just mean that more of the return is in the form of a dividend, not that the return is higher.