Fed Chair Kevin Warsh Warned a Rate Hike Could Be Coming. Some Dividend Stocks Would Get Hurt -- Others Could Actually Win.
Key PointsThe Federal Reserve could raise rates at its next meeting.
Fed Chair Kevin Warsh warned investors about a potential rate hike at the Jackson Hole meeting on August 28. This raised the odds of a 25-basis-point increase to 60.4% for September 16. High-yield dividend stocks typically suffer when interest rates rise, as they often rely on debt and attract investors seeking fixed-income alternatives.
However, some sectors and companies may benefit from higher rates. For instance, business development companies (BDCs) and mortgage REITs with floating-rate debt holdings can see their yields increase as interest rates rise. Ares Capital and Starwood Property Trust are examples of such stocks that could gain if the Fed raises rates, as their business models are less vulnerable to rate fluctuations.
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