A list of nine dividend stocks that will benefit from higher rates was compiled by Morningstar and Huber Financial, a purveyor of investment newsletters. As reported in Morningstar,
Here are three reasons that dividend investors should not fear the Fed, and nine yield plays that should do well as interest rates rise, according to some of the best dividend stock newsletter writers.
Reason 1: Dividend payers outperform when the Fed is hiking rates (believe it or not)
Reason 2: The new Fed policy is already priced in
Reason 3: The Fed is not going into aggressive rate-hike mode
Nine stocks that will perform well are:
Alliant Energy Corp. (LNT), which operates in Wisconsin and Iowa. The stock has a 3.7% dividend yield.
NextEra Energy Inc. (NEE), which is using stable, regulated cash flows from its business in Florida (about 70% of revenue) to invest in renewable energy, like wind power. It features a 3.1% yield.
Duke Energy Corp. (DUK), which has a 4.8% yield. Duke's shares are weak, in part, because of some exposure to Latin America, but this is only a small part of the business.
Ventas Inc. (VTR), a REIT that builds senior housing and has a lovely yield of 5.4%. Ventas' stock has been beaten down on concerns about overbuilding. But Peters thinks the worries are overdone, in part, because the growing number of seniors over the next few decades will support demand. What's more, Ventas has built-in markets where it will be tougher for competitors to add supply.
Procter & Gamble Co. (PG), whose stock has been hammered because investors have gotten tired of waiting to see the benefits from a turnaround. The company is selling off lots of businesses to focus on the more profitable brands. "You have to give them another one or two years," says M* Dividend Investor publisher Peters. "I like to buy a washed-out name where people are sick and tired of being patient." Procter & Gamble has been hurt by the strong dollar, which translates overseas earnings into fewer greenbacks in the U.S., where it reports earnings. "But the dollar won't be this fierce headwind year after year,"
AT&T Inc. (T), which has a yield of 5.7%, a level that's also its repetitive high yield.
Wal-Mart Stores Inc. (WMT), whose shares have fallen so much the company has blown through its repetitive high yield of 2.5%, to a yield of 3.3%.
WEC Energy Group Inc. (WEC), with a current yield of 4%, compared with a typical high of 3.6% at bottoms for the stock.
Chevron Corp. (CVX), which historically looks undervalued when it offers a yield of 3.5%. It has fallen so much it now has a yield of 4.75%.
This article first appeared in the Feb issue of Guiding Mast Investments. Thanks for reading, George Fisher