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With the Federal Reserve’s decision on interest rates just days away, traders are still trying to determine the best way to position their portfolios ahead of a possible September rate hike. In a new report, HSBC analyst Volker Borghoff explained why dividend stocks are the best way to go.
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Unique Cycle
There is a fear in the market that rising interest rates could pose a threat to high-yielding dividend (HYD) stocks because they offer the prospect of safer fixed-income returns for investors. However, Borghoff pointed out that this particular tightening cycle might not see the same substantial move in long-end rates that past cycles have seen.
He added that HYD stocks have underperformed the market for more than two years now. “Low growth and superior value characteristics are other positive factors in this environment,” Borghoff explained.
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Projections
HSBC is not expecting an interest rate hike this week. The firm is calling for the first hike to come in December of this year. Regardless of the timing, Borghoff sees the first rate hike as neutral to slightly positive for HYD stocks.
Top Picks
The report included a list of preferred stocks that currently demonstrate all the characteristics that HSBC likes to see when it comes to dividend plays. The firm projects that Hong Kong and Emerging Markets HYD stocks will be the biggest beneficiaries from the first hike.
HSBC named Freeport-McMoRan Inc (NYSE: FCX), Noble Corp plc (NYSE: NE), Copa Holdings, S.A. (NYSE: CPA) and PBF Energy Inc (NYSE: PBF) as top picks.
Disclosure: The author holds no positions in the stocks mentioned.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.