5 Best Dividend Stocks For Rising Interest Rates

In this article, we discuss 5 best dividend stocks for rising interest rates. If you want to read our detailed analysis of dividend stocks and their returns in the past, go directly to read 11 Best Dividend Stocks For Rising Interest Rates. 

5. The Procter & Gamble Company (NYSE:PG)

Dividend Yield as of January 19: 2.53%

An American multinational consumer goods company, The Procter & Gamble Company (NYSE:PG) is one of the best dividend stocks for rising interest rates as the company has endured previous inflationary periods better than its peers. It continued raising its dividends during these years and its dividend growth streak stands at 66 years. The company currently pays a quarterly dividend of $0.9133 per share and has a dividend yield of 2.53%, as of January 19.

In December, Deutsche Bank raised its price target on The Procter & Gamble Company (NYSE:PG) to $162 with a Buy rating on the shares, presenting a positive stance on the consumer staples sector.

The Procter & Gamble Company (NYSE:PG) recently announced its fiscal Q2 2023 earnings and reported a 5% year-over-year growth in its organic sales. Its operating cash flow came in at $3.6 billion and its free cash flow productivity stood at 72%. The company also returned $2.2 billion to shareholders in dividends during the quarter.

As of the close of Q3 2022, 69 hedge funds tracked by Insider Monkey reported owning stakes in The Procter & Gamble Company (NYSE:PG), down from 71 in the previous quarter. The collective value of these stakes is over $4.08 billion.

Rowan Street Capital mentioned The Procter & Gamble Company (NYSE:PG) in its Q4 2022 investor letter. Here is what the firm has to say:

“Let’s look at The Procter & Gamble Company (NYSE:PG). Dividend yield is 2.4%. Earnings are forecasted to grow at 5.9%, and its current earnings multiple is at 25x. Now, lets say over the next 3-5 years the market loses interest in the “safe”, mature companies that grow at anemic rates and gets an appetite for growth again. It’s very unlikely that Mr. Market will be paying 25x for 5.9% earnings growth. Lets assume that multiple declines to the market average of 18x — that would be ~6.9% drag per year on the total expected return over next 3-5 years. If we get 2.4% (dividend) + 5.9% (earnings growth) – 6.9% (decrease in earnings multiple) = 1.4% (annual return we can expect on average from this stock).”

4. Bank of America Corporation (NYSE:BAC)

Dividend Yield as of January 19: 2.64%

Bank of America Corporation (NYSE:BAC) is a multinational investment bank and financial services company. In January, Citigroup raised its price target on the stock to $38 with a Neutral rating on the shares, following the company’s quarterly earnings. The firm also appreciated the company’s outperformance in Q4 2022.

In the fourth quarter of 2022, Bank of America Corporation (NYSE:BAC) reported revenue of $24.5 billion, which showed an 11.2% growth from the same period last year. The company is one of the best dividend stocks for higher interest rates because the yield on its current and future loans would increase due to interest rates hike.

Bank of America Corporation (NYSE:BAC) currently pays a quarterly dividend of $0.22 per share and has a dividend yield of 2.64%, as of January 19. The company holds a nine-year track record of consistent dividend growth.

At the end of Q3 2022, 97 hedge funds tracked by Insider Monkey owned investments in Bank of America Corporation (NYSE:BAC), worth over $35.6 billion collectively. Berkshire Hathaway was the company’s leading stakeholder in Q3.

Ariel Investments mentioned Bank of America Corporation (NYSE:BAC) in its third-quarter 2022 investor letter. Here is what the firm has to say:

“We initiated three new positions in the quarter. We added leading financial institution Bank of America Corporation (NYSE:BAC) which serves individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. The current company was formed through various mergers including NationsBank, FleetBoston, US Trust, Countrywide Financial, and Merrill Lynch with the legacy commercial bank to form a national banking powerhouse and bulge bracket investment firm. As one of the ‘Big Four’ U.S. banks it enjoys scale driven cost advantages and economies of scale which provide meaningful competitive advantages and potential for strong returns in the largely commoditized banking industry. A survivor of the financial crisis, BAC has emerged with a solid capital base and stands to benefit from a rising interest rate environment.”

3. JPMorgan Chase & Co. (NYSE:JPM)

Dividend Yield as of January 19: 2.99%

JPMorgan Chase & Co. (NYSE:JPM) is another financial services company that makes it to our list of the best dividend stocks for rising interest rates. In the fourth quarter of 2022, the company reported a 48% year-over-year growth in its net interest income at $20.3 billion, which was driven by high-interest rates. Its average loans also showed a 6% growth from the same period last year.

Following the company’s recent quarterly earnings, Citigroup raised its price target on JPMorgan Chase & Co. (NYSE:JPM) in January to $165 with a Buy rating on the shares.

On December 13, JPMorgan Chase & Co. (NYSE:JPM) declared a quarterly dividend of $1.00 per share, which fell in line with its previous dividend. As of January 19, the stock has a dividend yield of 2.99%.

At the end of Q3 2022, 110 hedge funds in Insider Monkey’s database owned stakes in JPMorgan Chase & Co. (NYSE:JPM), up from 104 in the previous quarter. These stakes have a total value of over $6.4 billion. With over 7.8 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.

2. Extra Space Storage Inc. (NYSE:EXR)

Dividend Yield as of January 19: 3.99%

Extra Space Storage Inc. (NYSE:EXR) is a Utah-based real estate investment trust company that invests in self-storage facilities. The company offers a per-share dividend of $1.50 every quarter and has a dividend yield of 3.99%, as of January 19. It has been raising its dividends consistently for the past 12 years. The company is among the best dividend stocks for rising interest rates as demand for self-storage space has increased after the pandemic.

In January, Raymond James upgraded Extra Space Storage Inc. (NYSE:EXR) to Outperform with a $170 price target. The firm noted the company’s occupancy over rate strategy during this uncertain economic condition.

As of the end of September 2022, 27 hedge funds tracked by Insider Monkey reported owning stakes in Extra Space Storage Inc. (NYSE:EXR), the same as in the previous quarter. The collective value of these stakes is roughly $148 million.

Baron Funds mentioned Extra Space Storage Inc. (NYSE:EXR) in its Q2 2022 investor letter. Here is what the firm has to say:

“Following a sharp correction in its share price during the second quarter, we acquired shares in Extra Space Storage Inc. This REIT has assembled the second-largest self-storage portfolio in the country and has the largest portfolio of third-party managed self-storage facilities. In our opinion, Extra Space’s management team is excellent. Over the last decade, management has delivered strong occupancy gains, rent growth, and expense control that has led to a cost of capital advantage relative to its peers. Management has capitalized on its cost of capital advantage by tripling its owned self-storage count since 2010. We believe the long-term growth opportunity for the company remains strong.”

1. 3M Company (NYSE:MMM)

Dividend Yield as of January 19: 4.92%

3M Company (NYSE:MMM) is an American multinational conglomerate company. It sells a wide range of products that belong to different industries which would help the company to stay afloat during interest rate hikes. Moreover, the company generated strong cash in the third quarter of 2022, with an operating cash flow of $1.5 billion and a free cash flow of $1.4 billion. Due to this, it is one of the best dividend stocks for rising interest rates.

3M Company (NYSE:MMM) has been raising its dividend consistently for the past 64 years. The company currently pays a quarterly dividend of $1.49 per share for a dividend yield of 4.92%, as of January 19.

At the end of Q3 2022, 49 hedge funds tracked by Insider Monkey reported owning stakes in 3M Company (NYSE:MMM), down from 54 in the previous quarter. The consolidated value of these stakes is over $1.45 billion.

Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:

“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.

You can also take a look at 12 Best Big Data Stocks To Buy and 13 Cash Rich Penny Stocks That Hedge Funds Are Buying

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