While the Federal Reserve has yet to boost interest rates for a second time since the Financial Crisis, a rate hike is coming, and it will likely come in the next few months.
The Fed has kept rates low in hopes of spurring the overall economy, and the result has been money flowing into dividend stocks that would have otherwise been invested in fixed-income assets.
If and when the Fed decides to make a rate hike, the initial impact on stocks will be a money transfer out of dividend stocks and back into fixed-income assets, as yield hunters will chose to put some money back to work in fixed assets for the slightly higher yield they will be able to realize on their investments.
Even with another rate hike, interest rates will still be very low, so it is hard to imagine a rate hike sending stocks into a huge downward spiral, but there will be some impact. We have already seen the market start to price in a future rate hike, with interest-sensitive stocks either falling or rising depending on how rates impact their overall business.
As mentioned, any potential rate hike will not be big enough to warrant selling off all our dividend stocks, but investors should be prepared for what is to come. As such, we want to take a look at a handful of dividend stocks that should be OK even once rates start to rise.