There was no surprise Wednesday when the Federal Reserve announced that the federal funds rate was being lifted 50 basis points. In addition, Fed Chair Jay Powell laid out the case that many across Wall Street have expected. Additional 50 basis point hikes are probably on the way in June and July, while the Federal Reserve balance sheet runoff begins in June to lower the staggering $8.5 trillion amount that resides on the books at the Fed.
While certain sectors tend to do well in a rising interest rate environment, most tend to underperform. We screened the S&P 500 stocks looking for those that pay the highest dividends in the venerable index and look like they can do well if we have a seismic downturn.
We found seven companies that are all rated Buy at Wall Street at major firms and look like incredible ideas in a very shaky market. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
Shareholders receive a 6.49% dividend. Deutsche Bank team has a $60 target price on Altria stock, and the consensus target is $57.04. The stock closed on Wednesday at $56.40.
AT&T
The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.
Its Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.
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