Prospect Capital Corporation (PSEC), BGC Partners, Inc. (BGCP): Two Dividend Stocks to Buy If Rates Go Higher

BGC Partners, Inc. (NASDAQ:BGCP) doesn’t necessarily make money from a rate increase. Instead, it makes money from volatility and uncertainty. When the markets worry about Fed action, deal-making in interest-rate swaps (products that allow borrowers and lenders to swap rate risk with another party) becomes fantastically profitable as volumes spike.

Rates and foreign exchange trading have offered the biggest profit margin of BGC Partners, Inc. (NASDAQ:BGCP)’s trading business. The company’s foreign exchange segment picked up after a 2012 slump, rising 14% year over year.

The company pays an impressive quarterly dividend of $0.12 per share, giving BGC Partners, Inc. (NASDAQ:BGCP) a yield of 8% at the current price. Investors should watch the company’s reported distributable earnings, which is the basis of its quarterly dividend. BGC Partners, Inc. (NASDAQ:BGCP) frequently pays out more than 100% of its bottom-line GAAP income to shareholders.

Rising rates aren’t the end of dividend-paying stocks. High-yielding Prospect Capital Corporation (NASDAQ:PSEC) and BGC Partners, Inc. (NASDAQ:BGCP) are compelling ideas for investors who want investments with positive exposure to rate hikes.

The article 2 Dividend Stocks to Buy If Rates Go Higher originally appeared on Fool.com is written by Jordan Wathen.

Fool contributor Jordan Wathen and The Motley Fool have no position in any of the stocks mentioned.

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