The Federal Reserve could begin cutting rates as early as September — and income investors would do well to snap up dividend-paying stocks that offer solid yields. Fed funds futures pricing suggests a 100% likelihood that the central bank will ease on interest rates at next month's meeting, according to CME FedWatch . Economists at Bank of America see the Fed dialing back its target rate – currently at a range of 5.
25%-5.5% – to 3.25%-3.
5% in mid-2026. This is likely to bring yields on money market funds, which are now sitting above 5% , crashing down. However, investors can continue generating portfolio income if they snap up the right dividend stocks.
"A drop in money market yields could drive a shift in retiree assets into higher dividend yield stocks," Bank of America equity and quant strategist Savita Subramanian wrote in a Thursday note. Subramanian's team screened the S & P 500 for stocks that are expected to have dividend yields that are higher than the current 3-year Treasury note yield of roughly 3.9% over the next three years.
Investors should be aware that there's more to buying dividend payers than just shopping for the richest yields. High yields can be an indication that a company's stock is on a sharp downward trajectory. Dividend yields that are too high may also raise the question of whether the company can sustain these payments to investors.
Here are a few of the buy-rated names that Bank of America turned up. Data storage player Seagate Technology m.